14 DAY TRIAL // After analyzing the countries' economic interconnectedness, physicists from universities in Greece, Switzerland and Israel found that some of the nations that could cause a global crash, actually have a very small gross domestic production.
They used data from the Bureau Van Dijk - the provider of company information and business intelligence, to assess every country's economy, and they applied the Susceptible-Infected-Recovered (SIR) model, to identify the twelve countries that have the greatest power of causing a global crisis.
Amazingly, Belgium and Luxembourg are, alongside the United States, part of the top twelve.
The team included researchers from the Universities of Thessaloniki, Lausanne and Bar-Ilan, and used a statistical approach on two different databases (to avoid bias) to point out the effects of hypothetical economic crashes in several countries.
One network used data on the 4,000 world corporations with the highest productivity, while the second one was based on data on import and export relations between 82 countries worldwide.
This allowed the scientists to identify the links between different countries, to map the global economy based on a very complex network and also to estimate the effect of one failing economy on the others.
The SIR model – previously used to model the spreading of disease epidemics, was applied to these two networks, depending on the strength of the links between countries, on the size of the crash and, of course, on the economic power of the potentially endangered country.
The results were basically the same: when using the corporate data, Belgium, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the USA and the UK, were forming the inner core of the countries that could cause the most damage to the global economy, if they were to crash.
When considering the import/export data, the inner core was formed by Belgium, China, France, Germany, Italy, Japan, Luxembourg, Netherlands, Russia, Spain, the USA and the UK.
The researchers explained that China was added because of the large fraction of Chinese trade volume, which comes from subsidiaries of western corporations based in China.
“Surprisingly, not all 12 countries have the largest total weights or the largest GDP,” the researchers write.
“Nevertheless, our results suggest that they do play an important role in the global economic network.
“This is explained by the fact that these smaller countries do not support only their local economy, but they are a haven for foreign investments.”
The analysis was published today, Thursday 25 November 2010, in New Journal of Physics (co-owned by the Institute of Physics and German Physical Society).