Systemic trade risk of critical resources

Klimek P, Obersteiner M, & Thurner S (2015). Systemic trade risk of critical resources. Science Advances 1 (10): e1500522. DOI:10.1126/sciadv.1500522.

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Abstract

In the wake of the 2008 financial crisis, the role of strongly interconnected markets in causing systemic instability has been increasingly acknowledged. Trade networks of commodities are susceptible to cascades of supply shocks that increase systemic trade risks and pose a threat to geopolitical stability. We show that supply risk, scarcity, and price volatility of nonfuel mineral resources are intricately connected with the structre of the worldwide trade networks spanned by these resources. At the global level, we demonstrate that the scarcity of a resource is closely related to the susceptibility of the trade network with respect to cascading shocks. At the regional level, we find that, to some extent, region-specific price volatility and supply risk can be understood by centrality measures that capture systemic trade risk. The resources associated with the highest systemic trade risk indicators are often those that are produced as by-products of major metals. We identify significant strategic shortcomings in the management of systemic trade risk, in particular in the European Union.

Item Type: Article
Research Programs: Advanced Systems Analysis (ASA)
Ecosystems Services and Management (ESM)
Bibliographic Reference: Science Advances; 1(10):e1500522 [November 2015]
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 08:52
Last Modified: 17 Feb 2016 15:52
URI: http://pure.iiasa.ac.at/11340

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