Network structure and fat tails in macroeconomic shocks

I just came across a working paper by Daron Acemoglu, Asuman Ozdaglar, and Alireza Tahbaz-Salehi, entitled “MICROECONOMIC ORIGINS OF MACROECONOMIC TAIL RISKS”. Clearly I am a little late to the game, as this paper appeared in an earlier form in June 2013, but it reminded me of this paper, “Network Formation and Systemic Risk, Second Version” by Selman Erol and Rakesh Vohra (who cite what appears to be an earlier version of the Acemoglu et al. paper). I took a look at the latter paper recently. While I have only skimmed the Erol and Vohra paper and only read the abstract of the Acemoglu et al. paper, it seems that both are concerned with how the structure of the network connecting firms or financial institutions to each other can make the economy fragile when random shocks affect parts of it. Surely this is worth reading in more detail by folks interested in network economics, like myself, not just by macroeconomists.

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