Networks and Economic Fragility

Matthew Elliott, Benjamin Golub*

*Corresponding author for this work

Research output: Contribution to journalReview articlepeer-review

3 Scopus citations


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

Original languageEnglish (US)
Pages (from-to)665-696
Number of pages32
JournalAnnual Review of Economics
StatePublished - 2022

ASJC Scopus subject areas

  • Economics and Econometrics


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