Worldwide spreading of economic crisis
linked to by 1 published by arXiv on Mon 23rd Aug 10
We model the spreading of a crisis by constructing a global economic networkand applying the Susceptible-Infected-Recovered (SIR) epidemic model with avariable probability of infection. The probability of infection depends on thestrength of economic relations between the pair of countries, and the strengthof the target country. It is expected that a crisis which originates in a largecountry, such as the USA, has the potential to spread globally, like the recentcrisis. Surprisingly we show that also countries with much lower GDP, such asBelgium, are able to initiate a global crisis. Using the {\it k}-shelldecomposition method to quantify the spreading power (of a node), we obtain ameasure of ``centrality'' as a spreader of each country in the economicnetwork. We thus rank the different countries according to the shell theybelong to, and find the 12 most central countries. These countries are the mostlikely to spread a crisis globally. Of these 12 only six are large economies,while the other six are medium/small ones, a result that could not have beenotherwise anticipated. Furthermore, we use our model to predict the crisisspreading potential of countries belonging to different shells according to thecrisis magnitude.Comment: 13 pages, 4 figures and Supplementary MaterialPosts discussing this item
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Readings: Drought, Commuters, Resources, China, Google Finance, Canada, etc.
posted to Paul Kedrosky's Infectious Greed on Tue 24th Aug 10
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