Macroprudential Modeling Based on Spin Dynamics in a Supply Chain Network

The economic crisis of 2008 showed that conventional microprudential policy to ensure the soundness of individual banks was not sufficient, and prudential regulations to cover the whole financial sector were desired. Such regulations attract increasing attention, and policy related to those regulations is called macroprudential policy, which aims to reduce systemic risk in the whole financial sector by regulating the relationship between the financial sector and the real economy. In this paper, using a spin network model, we study channels of distress propagation from the financial sector to the real economy through the supply chain network in Japan from 1980 to 2015 and discuss good indicators for macroprudential policy. First, an estimation of the exogenous shocks acting on the communities of real economy in the supply chain network provides us evidence of the channels of distress propagation from the financial sector to the real economy through the supply chain network. Furthermore, causal networks between exogenous shocks and macroeconomic variables clarified the characteristics of the lead–lag relationship between exogenous shocks and macroeconomic variables as the bubble burst. In summary, monitoring temporal changes of exogenous shocks and the causal relationship among the exogenous shocks and macroeconomic variables will provide good indicators for macroprudential policy.