arXiv subjects

Vipin P Veetil

Publications and source records attributed to Vipin P Veetil.

4 recordsLinked to original sources

arXiv2026

Network Origins of the Money-Output Relation

This paper develops a dynamic production-network model in which monetary non-neutrality emerges under fully flexible prices. Firms finance intermediate-input purchases from current nominal balances, and intermediate goods arrive with heterogeneous lead times across suppliers. A monetary shock then has two distinct effects. The first is miscoordination: because production uses dated input bundles assembled under past nominal conditions, the shock disturbs the composition of usable inputs (within and across firms) and thereby generates a deadweight loss. The second is reallocation: because the incidence of the shock is tilted toward smaller firms, which are disproportionately downstream, the shock redistributes resources along the supply chain. More specifically, positive shocks push resources downstream, negative shocks pull them upstream. This means that under a negative shock, both the miscoordination and the reallocation effect reduce downstream output and therefore GDP. Under a positive shock, reallocation raises GDP while miscoordination reduces it. The money-output relation is therefore sign-asymmetric: negative shocks generate sharp contractions, while positive shocks generate at most mild expansions, and sometimes none. Computational experiments on a reconstructed US production network generate output declines after a monetary contraction that are about three times as large as the increases after a monetary expansion.

econ.TH↗

arXiv2026

Inflation and the Distortion of Relative Prices

This paper presents a production network model of inflationary dynamics in which inflation can have near-zero correlation with the size of price change yet generate significant distortions in relative prices. New money enters unevenly across firms and percolates through buyer--seller links, thereby displacing relative prices even when every price is free to adjust and every market clears. Under state-dependent price stickiness, firms absorb higher inflation through more frequent rather than larger price changes, leaving the distortion intact. The distortion depends critically on the spectral gap of the production network, which sets the rate at which the economy converges to equilibrium. We quantify the mechanism on a reconstructed production network with the universe of firms in the United States. At a moderate rate of inflation, the typical firm's relative-price distortion is of the same magnitude as one quarter's inflation. The size of price change remains essentially uncorrelated with the magnitude of relative-price distortion.

econ.TH↗

arXiv2026

Reconstructing Large Scale Production Networks

Firm-to-firm production networks matter for aggregate propagation, but they are rarely observed. This paper reconstructs national-scale, weighted firm-to-firm networks from two public objects: a sectoral input--output table and the distribution of firm sizes by sector. The algorithm first draws a binary buyer-seller backbone from a sector-aware gravity model and then assigns weights by a minimum-energy program. A Markov closure makes the reconstructed network primitive, so it has a unique stationary distribution. The weighting program keeps one-step firm balances and sectoral flows close to the data; the stationary money vector is then checked ex post and remains close in aggregate. For the United States we reconstruct a network with about 6.5 million firms and 340 million links in roughly four hours on a single workstation. We also reconstruct the networks of Japan, the United Kingdom, Australia, Finland, and Denmark. The Japanese reconstruction, built without any link data, reproduces the heavy-tailed degree regime documented in the country's observed production network. The reconstructed networks exhibit customer tails heavier than supplier tails, though the algorithm treats the two sides symmetrically. We also run computational experiments on the reconstructed networks to assess the systemic risk posed by the failure of individual firms. These experiments show that neither firm size nor degree nor sectoral position is a good proxy for the aggregate losses generated by a firm's failure. For such questions, there is no good substitute for the complete weighted buyer-seller network that we reconstruct. We release the reconstruction code, the generated networks, a Python library, and a graphical

econ.GN↗

arXiv2026

Economic Power in International Trade

Economic power is a country's capacity to harm another more than itself by withdrawing from a trading relationship. This paper develops a short-run model of trade disruptions to measure that power through counterfactual experiments. Sanctioned buyers and sellers relocate some of the barred flows onto alternate trade partners. Every producer, including those the sanction never touched, loses efficiency as inputs cease to arrive in their original proportions. The post-sanction equilibrium is the fixed point at which the reallocation of trade and the loss of efficiency generate self consistent production levels across all sectors of all countries in the world. Using a world input--output table of eighty economies and fifty industries, we solve for 9,480 such sanction equilibria, one for each unilateral and bilateral severance of a trading relationship. We compare the original equilibria with the sanction equilibria to compute the asymmetry in losses across bilateral country pairs due to the severance of trade between them. Our results show that mutual trade dependence is anything but mutual. The distribution of power in world trade is heavy-tailed. In the median trade relationship, one country inflicts on its trading partner four and a half times the loss it bears. Only 1 in 7 bilateral pairs has a semblance of having near equal power. The United States holds the favorable side against all seventy-nine of its partners and China against all but one. It is worth noting that power bears nearly no relation to the trade balance. Our measure of power among nation states also matches the historical record of economic coercion. The state that imposed the sanction holds the more powerful position in 170 of 185 episodes of the Global Sanctions Data Base.

econ.GN↗