Economic uncertainty, supply chain transmission, and corporate effective investment

During recent years, global economic uncertainty has risen sharply. The effect of economic policy uncertainty on business activities has become a research hotspot in academia, while previous studies mainly focus on the independent individuals of companies. It is considered that companies are closely related with others from upstream and downstream industries, thereby market transaction costs significantly influence the survival and development of companies, especially in the presence of high economic policy uncertainty. Therefore, this paper explores the impact of economic policy uncertainty on vertical integration from the perspective of supply chain. Vertical integration is defined that companies control adjacent production stages vertically on the supply chain, internalizing transactions between external companies into internal production activities.To be specific, using a sample of listed companies from manufacturing industry during 2000-2018 in China, as well as the vertical integration indicator manually sorted out and calculated, this paper investigates the effect of economic policy uncertainty on vertical integration. The result shows that the higher economic policy uncertainty is, the more inclined companies are to pursue vertical integration. The robustness test and instrumental variable estimation show that this basic result is valid and robust. The heterogeneity analysis conducted at firm-, industry-, and region-level shows that for non-state-owned companies, companies with higher asset specificity, and companies from high-tech industries, more competitive industries, more volatile industries, and the eastern region, the effect of economic policy uncertainty on vertical integration is greater. Further, this paper explores the mechanism about how economic policy uncertainty influences vertical integration. The result shows that economic policy uncertainty significantly decreases the investment intensity of upstream suppliers and downstream distributors, and leads to higher financing constraints, thereby inducing the propensity of vertical integration. More than that, this paper analyzes the reason why economic policy uncertainty has a greater impact on upstream industries from three perspectives: government regulations on the upstream and downstream industries, the proportion of state-owned enterprises distributed in upstream and downstream industries, and the capital intensity of upstream and downstream industries.This paper has the following contributions: From the perspective of supply chain, it explores the impact of economic policy uncertainty on micro enterprise operation; from the perspective of economic policy uncertainty, it enriches the research on the influencing factors of vertical integration, and provides new empirical evidence from China’s manufacturing industry. In addition, from the perspective of supply chain management, this paper provides policy recommendations and management implications for local governments and enterprises to deal with emergencies and the resulting economic policy uncertainty.

Natural resources commodity prices volatility and economic uncertainty: Evaluating the role of oil and gas rents in COVID-19

This study investigates the impact of economic policy uncertainty (EPU) on food prices (FP) in case of Pakistan by using monthly time series data from Jan 2011 to Dec 2023. The study utilized unit root tests such as, Augmented Dickey Fuller (ADF) and Phillips Perron (PP) tests to check the stationarity of the variables. To investigate the asymmetric relationship between EPU and FP, the study utilizes the Nonlinear Autoregressive Distributed Lag (NARDL) model along with the Bounds testing approach to determine the presence of long-run cointegration. The short-run results from the NARDL estimation indicate that an increase in EPU has a negative effect, leading to a decline in food prices. Conversely, the long-run findings reveal that EPU has a positive and significant impact on food prices. Additionally, the finding of Bound test confirmed the long-term Cointegration between EPU and food prices. This implies that to executing strategies that stabilize the macroeconomic environment and enhance market confidence can alleviate the inflationary effects of policy uncertainty on food prices. Further, improving supply chain resilience and establishing early-warning systems can help manage short-term price fluctuations caused by economic uncertainty.

PurposeThis study presents the impact of Economic Policy Uncertainty (EPU)-induced Trade Supply Chain Vulnerability (TSCV) on the Small and Medium-Sized Enterprises (SMEs) in India by leveraging the World Bank Enterprise Survey data for 2014 and 2022. Applying econometric techniques, it examines firm size’ influence on productivity and trade participation, providing insights for enhancing SME resilience and trade participation amid uncertainty.Design/methodology/approachThe econometric techniques focus on export participation, along with variables such as total exports, firm size, productivity, and capital intensity. It addresses crucial factors such as the direct import of intermediate goods and foreign ownership. Utilizing the Cobb-Douglas production function, the study estimates Total Factor Productivity, mitigating endogeneity and multicollinearity through a two-stage process. Besides, the study uses a case study of North Indian SMEs engaged in manufacturing activities and their adoption of mitigation strategies to combat unprecedented EPU.FindingsResults reveal that EPU-induced TSCV reduces exports, impacting employment and firm size. Increased productivity, driven by technological adoption, correlates with improved export performance. The study highlights the negative impact of TSCV on trade participation, particularly for smaller Indian firms. Moreover, SMEs implement cost-based, supplier-based, and inventory-based strategies more than technology-based and risk-based strategies.Practical implicationsPolicy recommendations include promoting increased imports and inward foreign direct investment to enhance small firms’ trade integration during economic uncertainty. Tailored support for smaller firms, considering their limited capacity, is crucial. Encouraging small firms to engage in international trade and adopting diverse SC mitigation strategies associated with policy uncertainty are vital considerations.Originality/valueThis study explores the impact of EPU-induced TSCV on Indian SMEs’ trade dynamics, offering nuanced insights for policymakers to enhance SME resilience amid uncertainty. The econometric analysis unveils patterns in export behavior, productivity, and factors influencing trade participation during economic uncertainty.

In the last decade, increasing costs and organizational concerns regarding the funding and allocation of financial resources have led to significant attention being given to financial flow and its effects on planning decisions throughout supply chain networks. This study aims to develop a simulation-optimization model to integrate the financial and physical flows in a supply chain planning problem under economic uncertainty. The simulation-optimization model includes a mixed-integer linear programming model and a simulation-based optimization model that are connected through an iterative process. The economic value added (EVA) index is used to measure the financial performance of the supply chain. This study extends the literature on two research domains namely supply chain planning and finance and simulation-optimization modelling for supply chain management. The proposed model applies a scenario approach to cope with economic uncertainty in the supply chain. To demonstrate the efficiency of the proposed model, the performance of the proposed model in solving a test problem from the recent literature is compared with the performance of a conventional simulation-based optimization and mixed-integer linear programming approaches. The results of the study show a minimum of 6% improvement in the EVA obtained from the proposed simulation-optimization model compared to the EVA obtained from the simulation-based optimization model in all the studied scenarios. Moreover, the standard deviation of the EVA obtained from the proposed simulation-optimization model is at least 69% lower than the EVA obtained from the mixed integer programming model in all the studied scenarios. This shows that the proposed simulation-optimisation approach is more robust to economic uncertainty than the mixed-integer linear programming approach.

Assessing the impact of macroeconomic uncertainties on bank stability: Insights from ASEAN-8 countries

Based on the background of continuous increasing external economic uncertainty, this paper builds GARCH-MIDAS model to explore the volatility of copper price caused by global economic policy uncertainty in copper supply chain finance and analyzes the changes of refined copper supply and demand caused by this volatility. It is found that the increases of economic policy uncertainty will enhance the long- term volatility of copper. Moreover, the violent fluctuation of copper price caused by the impact of powerful economic policy uncertainty will weaken the demand confidence of refined copper market and lead to the phenomenon of oversupply. On the contrary, the moderate fluctuation of copper price due to the impact of weak economic policy uncertainty will boost the demand confidence of refined copper market and lead to the phenomenon of short supply.

Micro and small enterprises in the entrepreneurial sector are essential to the process of economic growth in both developed and developing nations. However, microenterprise is more vulnerable to the current economic climate and uncertainties because they are young and have fewer liabilities. From 2017 to 2021, micro entrepreneurs in Malaysia faced various challenges due to economic uncertainty which were political uncertainty, trade policy uncertainty, exchange rate uncertainty, and the COVID-19 pandemic. They should be able to adapt and implement effective strategies to be better positioned to succeed and grow their businesses. The purpose of this study is to investigate the micro entrepreneur strategies to revitalise business performance in the face of economic uncertainty. The key micro entrepreneur strategies chosen for this study include supply chain management, cash flow management, digital marketing, diversification, and risk management. 5 micro entrepreneurs have been interviewed to get the results. By using MAXQDA software, the researcher can identify the relationship between micro entrepreneur strategies and business performance. In this study, will use a descriptive research design and a qualitative methodology. The research strategy for the study is through the interview. Based on the MAXQDA result, Respondent A, B, D, and E has utilised all five key micro entrepreneur strategies which are supply chain management, cash flow management, digital marketing, diversification, and risk management to revitalise their business performance in the face of economic uncertainty. According to the data analysis, all the variables are significant towards business performance, and the result is that supply chain management, cash flow management, and diversification are the most influencing strategies that influence business performance. However, Respondent C has utilised three key micro entrepreneur strategies which are supply chain management, cash flow management, and diversification to revitalise their business performance in the face of economic uncertainty. Given this, government and micro entrepreneurs recommend considering all five key micro entrepreneur strategies for promoting a culture of innovation and resilience within the small business community and for nurturing a culture of continuous improvement and adaptation for their business.

Background . Globalization, characterized by the worldwide exchange of goods, services, ideas, and culture, has profoundly influenced national economies. It involves the rapid development of productive forces necessitating new global production relations. Any efforts to restrict foreign goods or create non-market advantages for domestic producers will likely prompt retaliatory measures from other governments. Ukraine, located at Europe's crossroads and influenced by various geopolitical factors, is significantly impacted by globalization dynamics. Its engagement in global trade and economic relations has a history spanning several decades. Post-Soviet Union dissolution in 1991, Ukraine shifted from a centrally planned to a market-oriented economy, embracing international trade and investment. However, the 2014 Russian invasion drastically changed its economic path. The ongoing regional geopolitical tensions, worsened by Russian aggression, have severely challenged Ukraine's economic stability. The conflict has disrupted global supply chains and increased the fragility of Ukraine's economy, heightening its reliance on international support. Entities like the World Bank and the European Union have been crucial in aiding Ukraine's economic development and stability through financial support and policy guidance. Economic sanctions imposed in response to the conflict have further complicated Ukraine's economic situation. Trade, investment, and geopolitical risk-related policy issues are now central to shaping Ukraine's economic future and its ability to navigate uncertainties. Despite the challenges posed by the recent war and geopolitical tensions, opportunities exist for Ukraine to diversify trade relationships, advance political reforms, and strengthen its global position. Adapting to the evolving geopolitical landscape and leveraging its comparative advantages will be vital for Ukraine's long-term economic resilience. Thus, understanding globalization's impact on Ukraine demands a detailed examination of historical contexts, geopolitical dynamics, economic challenges, and growth opportunities. Methods . To obtain scientific results, the following methods were used: historical analysis which includes a historical overview of Ukraine's economic transition since the dissolution of the Soviet Union, detailing significant events like the 2014 Russian invasion and its impact on Ukraine's economy. Geopolitical and economic analysis examines the geopolitical factors influencing Ukraine, such as regional tensions and international support, highlighting the interconnectedness of politics and economics in the context of globalization. Policy Analysis discusses the roles of international organizations (e.g., World Bank, European Union) and the implications of economic policies and sanctions, suggesting a policy analysis method. The article looks forward, discussing potential opportunities and strategies for Ukraine to strengthen its economic resilience, showing an element of prospective or forward-looking analysis. Results . The invasion heightened geopolitical tensions and posed significant challenges for international relations. Ukraine's geopolitical risks stem from its complex history and strategic position between Russia and Europe. These risks strain relations with international players and impact economic stability and investment climates. The conflict caused economic uncertainties globally, affecting investment, financial stability, and market dynamics. Ukraine's role in globalization and its comparative advantage in natural resources and human potential influence its position in international trade. Disruptions led to production delays, increased costs, and supply shortages, impacting both businesses and consumers worldwide. Ukraine's integration into the global economy involves adhering to international standards and improving product competitiveness. The European Union's response through economic sanctions and trade policies illustrates its proactive stance against geopolitical risks and economic instability. Ukraine leverages its diverse resources and skilled workforce to strengthen its trade position. Effective utilization of comparative advantages and addressing geopolitical risks are critical for Ukraine's adaptation to global trade dynamics. The Russian invasion of Ukraine had profound consequences for global trade, emphasizing the interconnectedness and fragility of modern economiStrategies for diversification, resilience in supply chains, and effective risk management are essential for navigating geopolitical tensions and economic uncertainties. Conclusions . In conclusion, the Russian invasion of Ukraine in 2022 had significant repercussions on global trade, reshaping economic landscapes and geopolitical alliances. The conflict disrupted global supply chains, particularly in agriculture and manufacturing, and heightened geopolitical tensions, complicating international relations and cooperation. Ukraine's strategic location as a transit route for natural gas further influenced global energy dynamics, contributing to economic uncertainties and financial instability worldwide. This situation underscored the interconnectedness and fragility of modern economies, emphasizing the importance of diversification, resilience in supply chains, and effective risk management strategies to navigate geopolitical tensions and economic uncertainties. Understanding Ukraine's geopolitical risks, derived from its complex history and strategic position, is essential for comprehending the broader global landscape and the uncertainties facing the country. As Ukraine continues to integrate into the global economy, fostering innovation, collaboration, and a global mindset will be crucial for harnessing the opportunities presented by globalization while mitigating its inherent risks

Adoption of carbon regulation mechanisms facilitates an evolution toward green and sustainable supply chains followed by an increased complexity. Through the development and usage of a multi-choice goal programming model solved by an improved algorithm, this article investigates sustainability strategies for carbon regulations mechanisms. We first propose a sustainable logistics model that considers assorted vehicle types and gas emissions involved with product transportation. We then construct a bi-objective model that minimizes total cost as the first objective function and follows environmental considerations in the second one. With our novel robust-heuristic optimization approach, we seek to support the decision-makers in comparison and selection of carbon emission policies in supply chains in complex settings with assorted vehicle types, demand and economic uncertainty. We deploy our model in a case-study to evaluate and analyse two carbon reduction policies, i.e., carbon-tax and cap-and-trade policies. The results demonstrate that our robust-heuristic methodology can efficiently deal with demand and economic uncertainty, especially in large-scale problems. Our findings suggest that governmental incentives for a cap-and-trade policy would be more effective for supply chains in lowering pollution by investing in cleaner technologies and adopting greener practices.

The current global stock market volatility, described as a "Kangaroo" market due to its erratic fluctuations, is largely driven by the unpredictable trade policies of the United States under President Donald Trump. These policies, including the imposition and subsequent reversal of tariffs, have led to significant economic uncertainty, adversely affecting both consumer and business confidence. This uncertainty is compounded by factors such as fluctuating tariffs, federal job cuts, reductions in foreign aid, and volatile stock markets. The resulting economic instability has caused a marked decline in consumer confidence and spending, as evidenced by a 30% drop reported by the University of Michigan Survey of Consumers. The article explores how economic uncertainty influences GDP by affecting consumer behaviour and business investment. As consumers and businesses reduce spending, GDP growth is directly impacted, increasing the risk of recession. Additionally, the article examines the broader implications of uncertainty, such as inflation concerns, fluctuating interest rates, and changes in debt and credit conditions. The erratic nature of Trump's trade policies, including a recent temporary pause on new tariffs, has exacerbated global trade tensions, leading to disrupted supply chains and retaliatory measures from other countries. The long-term impacts of economic uncertainty are far-reaching, affecting infrastructure investment, innovation, government fiscal policy, international relations, and social stability. The potential for a recession looms as market volatility, consumer behaviour changes, and business hesitancy persist. The article underscores the need for stable policy guidance to mitigate the adverse effects of economic uncertainty, noting that persistent unpredictability could stifle economic activities and push the global economy towards a downturn.

Economic uncertainty has been increasing, as evidenced by recent fluctuations in global markets and unpredictable economic indicators such as volatile demand, stock market fluctuations, and unpredictable interest rates. Economic profitability and working capital efficiency are pivotal indicators of a business’s financial health, both of which are adversely impacted by economic uncertainty. However, these metrics may diverge as distinct objectives drive them. There exists a gap in the literature regarding effective strategies for managing the trade-off between these metrics under economic uncertainty. This study addresses this gap by introducing a simulation-based optimization model that integrates system dynamics simulation and genetic algorithms. The proposed model aims to balance economic profitability and working capital efficiency within inventory management under partial trade credit. A recent real case study demonstrates the model’s applicability and reveals its superiority over conventional system dynamics simulation modeling. With its capacity to inform strategic and tactical decision-making, this model emerges as a valuable tool for supply chain and financial managers seeking to ensure financial stability amidst economic volatility.

Not Coming Home: Trade and Economic Policy Uncertainty in American Supply Chain Networks

Supply chain upstream shocks and downstream concentration in the new energy sector: Balancing diversification and centralization

Prior findings suggest that firms reduce investment when they face a higher degree of domestic economic policy uncertainty. In this paper, we provide a new finding that corporate investment of U.S. firms also declines when Chinese economic policy uncertainty rises, after controlling for U.S. economic policy uncertainty. Additional analysis suggests that the result is stronger for firms located in states with larger exports to China, implying the importance of global supply chain link in understanding firms' investment decisions.