Quantification of International Trade Network Performance Under Disruptions to Supply, Transportation, and Demand Capacity, and Exchange Rates in Disasters

35 Pages Posted: 13 May 2024

See all articles by Anna Nagurney

Anna Nagurney

University of Massachusetts Amherst - Isenberg School of Management

Dana Hassani

University of Massachusetts Amherst - Department of Operations and Information Management

Oleg Nivievskyi

Kyiv School of Economics; Free University Berlin; University of Queensland - School of Economics

Pavlo Matyshev

Kyiv School of Economics - Kyiv Economics Institute (KEI)

Date Written: March 29, 2024

Abstract

Both sudden-onset and slow-onset disasters are causing disruptions to global trade, impacting the availability and affordability of commodities from agricultural to mineral ones. In this paper, we develop a multicommodity international trade network equilibrium model under disaster scenarios with distinct probabilities of the occurrence of the disasters and their impacts on the capacities associated with production, transportation, and consumption. The disaster scenarios can also affect the exchange rates. We state the governing equilibrium conditions and derive the variational inequality formulation in commodity path flow variables and Lagrange multipliers associated with the capacity constraints. For each disaster scenario, we construct an international trade network performance measure, followed by a unified performance measure that includes all the disasters and their probabilities. Robustness is then quantified as the difference between the network performance under no disruptions and the unified performance measure. An international trade network component performance indicator is also given to assess the impacts of the complete removal of trade network supply markets, demand markets, and/or transportation routes. The modeling framework is then illustrated through a series of numerical examples, motivated by Russia's war on Ukraine. The work is of relevance to decision-makers and policy-makers.

Keywords: networks, international trade, disasters, disruptions, robustness analysis, variational inequalities

JEL Classification: C61, Q17

Suggested Citation

Nagurney, Anna and Hassani, Dana and Nivievskyi, Oleg and Martyshev, Pavlo, Quantification of International Trade Network Performance Under Disruptions to Supply, Transportation, and Demand Capacity, and Exchange Rates in Disasters (March 29, 2024). Available at SSRN: https://ssrn.com/abstract=4810971 or http://dx.doi.org/10.2139/ssrn.4810971

Anna Nagurney (Contact Author)

University of Massachusetts Amherst - Isenberg School of Management ( email )

Amherst, MA 01003-4910
United States

Dana Hassani

University of Massachusetts Amherst - Department of Operations and Information Management ( email )

Amherst, MA 01003-4910
United States

Oleg Nivievskyi

Kyiv School of Economics ( email )

vul. Mykoly Shpaka 3
Kyiv, 04119
Ukraine

Free University Berlin ( email )

Germany

University of Queensland - School of Economics ( email )

Pavlo Martyshev

Kyiv School of Economics - Kyiv Economics Institute (KEI) ( email )

Kyiv, 04119
Ukraine

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