Networks and Economic Fragility

Many firms, banks, or other economic agents embedded in a network of codependencies may experience contemporaneous, sharp drop functionality productivity following shock—even if that shock is localized moderate magnitude. We offer an extended review motivating evidence such fragility live concern supply networks and financial systems. then discuss models fragility, focusing on the forces make aggregate especially sensitive to environment. The key structural features determine their are reviewed, with emphasis importance phase transitions. turn endogenous decisions, both by market participants (e.g., firms investing formation robustness) planners authorities undertaking macroprudential regulation). Fragility has some distinctive implications for decisions.