Propagation of Sector-Specific Shocks within Spain and Other Countries

Abstract

We explore the propagation of sector-specific shocks through the Spanish input-output network. First, we outline a theoretical framework borrowed from the networks literature that allows us to distinguish between downstream (from suppliers to customers) and upstream (from customers to suppliers) propagation depending on the nature of the shocks considered, either supply- or demand-driven. Second, we compute industry-specific domestic multipliers and compare the propagation features of the Spanish production network with those of other countries using the National Input-Output Tables (NIOTs) for the year 2014. According to our findings, the electricity sector in Spain is the most systemic industry in terms of its economy-wide impact, which is significantly larger than in other European countries. We also find that the introduction of the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) in the second half of 2018 and its propagation through input-output linkages might have a larger aggregate impact in Germany than in Spain.