Trade networks and shock transmission capacity: a new taxonomy of Italian industries

Abstract

Applying the social network analysis to domestic and international input–output tables, we position the Italian sectors within their trade networks to analyze their ability to transmit economic shocks within the economic system. In this context, we propose a new taxonomy that classifies sectors in terms of the extent to, and the speed at, which they tend to spread domestic and foreign impulses throughout the Italian economic system. Our results show a mismatch between the industries which have a central position within international trade network and industries which play a central role for the domestic propagation of shocks. In this vein, the capacity of transmitting stimuli from abroad is limited, weakening the possibility to benefit from positive shocks, even though it could partially provide a shelter from negative one in the international business cycle.