One of the characteristic features of our modern economy is interdependence between firms (Lamy 2013). Firms purchase and sell goods simultaneously and these customer-supplier relationships generate a huge and complex network, through which individual shocks can propagate across the economy. For example, since transactions between firms are frequently performed on trade credit, the bankruptcy of a customer may worsen the financial conditions of its suppliers and in turn lead to another bankruptcy of its suppliers. In essence, the bankruptcy of a few firms may trigger a large-scale bankruptcy propagation involving many firms. If so, how large is bankruptcy propagation empirically observed in an economy? What is the risk of a large-scale bankruptcy propagation?
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