The production of goods and services in modern economies involves complex supply-chain relations that require the formation of new partnerships, the severance of unprofitable partnerships, and the adjustments in the intensity of the input-output relations across partners. Despite these strategic choices are central to modern production, the evidence on them is scarce, and standard models abstract from these forces by assuming effortless partnership formation and constant intensity in input-output relations. Yet, the protracted supply-chain disruptions in the post-Covid economy undeterred by the large economic stimulus show the centrality of supply chains to aggregate economic activity and challenge the conventional effectiveness of economic policies.
This project will provide novel evidence on the different margins of adjustments of supply-chain relations using new data for the US and UK, and it will develop a theoretical framework to explain the data and study the role of supply chains for the effectiveness of monetary policy.
The research project is funded by the British Academy and Leverhulme Trust
SRG22\221227
