I have been awarded an ERC starting grant to undertake research into the role of production networks in macroeconomics.
A modern economy is an intricately linked web of specialized production units, each relying on the flow of
inputs from their suppliers to produce their own output which, in turn, is routed towards other downstream
units. Recent work in economics stresses that the structure of this production network is key in determining
whether and how microeconomic shocks – affecting only a particular firm or technology – can propagate
throughout the economy and shape aggregate outcomes. If this is the case, understanding the structure of this
production network can better inform both academics on the origins of aggregate fluctuations and policymakers
on how to prepare for and recover from adverse shocks that disrupt these production chains.
This emerging literature on the role of production networks in macroeconomic fluctuations
has opened up the possibility of tracing back the origins of business cycles to disaggregated technologies
interacting through input-supply relations. However, as we further our understanding of how production
chains can affect aggregate outcomes, the need for convincing empirical evidence on whether the
mechanisms emphasized by theory are indeed borne out in the data becomes first-order. This is the first aim of the macronets project. At the same time, once one recognizes that the network structure of input-supply relations is linked to
macroeconomic outcomes a more ambitious set of questions emerges. What determines the structure of these
production networks? How do they evolve over time? The second aim of the macronets project revolves around these questions.