How network structure and exchange rate volatility drive the industrial ecosystem towards collapse: a global perspective

Abstract

This study investigates the impact of topological structure and exchange rate volatility on the collapse of industrial ecosystems. To answer this question, we developed a multidimensional nonlinear dynamic model that captures the dynamics of industrial ecosystem structures. Furthermore, the formulated complex model is reduced to a 1 D model system without lowering its ability to predict the tipping point (total collapse point). Using 1995–2015 input-output OECD data, the study was divided into three phases (before, during, and after the global crisis) for empirical testing. The results reveal that a more robust topological structure is more resilient to economic shocks. Countries with higher exchange rate volatilities are more vulnerable to global crises, even though they have a strong topological structure to resist risk. Furthermore, the upsurge in foreign direct investment (FDI) enhances the robustness of the industrial structure and reduces the exchange rate volatility risk. The results of this study will help strengthen the robustness of the industrial structure of the system to withstand both local and global perturbations better.