When Belgium sneezes, the world catches a cold

Nov 25, 2010

As the eurozone continues to wobble, new analysis of countries' economic interconnectedness finds that some of the countries with the greatest potential to cause a global crash have surprisingly small gross domestic production.

Using data from Bureau Van Dijk - the company information and business intelligence provider - to assess the reach and size of different countries' economies, and applying the Susceptible-Infected-Recovered (SIR) model, physicists from universities in Greece, Switzerland and Israel have identified the twelve countries with greatest power to spread a crisis globally.

The research published today, Thursday 25 November 2010, in (co-owned by the Institute of Physics and German Physical Society), groups Belgium and Luxembourg alongside more obviously impactful economies such as the USA in the top twelve.

Using a statistical physics approach, the researchers from the Universities of Thessaloniki, Lausanne and Bar-Ilan used two different databases to model the effect of hypothetical economic crashes in different countries. The use of two different databases aided the avoidance of bias but threw up very similar results.

The data used allowed the physicists to identify links between the different countries, by mapping the to a , and gauge the likelihood of one failed economy having an effect on another.

One network was created using data on the 4000 world corporations with highest turnover and a second using data on and relations between 82 countries.

The SIR model, successfully used previously to model the spreading of disease epidemics, is applied to these two networks taking into consideration the strength of links between countries, the size of the crash, and the economic strength of the country in potential danger.

When put to the test with the corporate data, the USA, the UK, France, Germany, Netherlands, Japan, Sweden, Italy, Switzerland, Spain, Belgium and Luxembourg were part of an inner core of countries that would individually cause the most economic damage globally if their economies were to fail.

Using the import/export data, China, Russia, Japan, Spain, UK, Netherlands, Italy, Germany, Belgium, Luxembourg, USA, and France formed the inner core, with the researchers explaining that the difference – particularly the addition of China to this second list – is due to a large fraction of Chinese trade volume coming from subsidiaries of western corporations based in China.

The researchers write, "Surprisingly, not all 12 countries have the largest total weights or the largest GDP. 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 do not support only their local economy, but they are a haven for foreign investments."

Explore further: Detecting neutrinos, physicists look into the heart of the Sun

More information: The researchers' paper can be downloaded for free: iopscience.iop.org/1367-2630/12/11/113043/fulltext

Related Stories

The Architecture of Globalization

Jun 28, 2007

Using recent advances in the study of networks, two University of Arkansas economists suggest alternative measures of international economic integration, popularly referred to as globalization. Rather than focusing on trade ...

HIV's march around Europe mapped

May 20, 2009

Those travelling abroad should take seriously advice to pack their condoms and keep their needles to themselves: research published today in the open access journal Retrovirology shows that tourists, travel ...

European league-tables for antibiotic resistance revealed

Jul 08, 2008

Tests of antibiotic resistance in cattle have revealed stark variation across thirteen European countries. The results, published today in BioMed Central’s open-access journal Acta Veterinaria Scandinavica, show that major ...

Trade safeguards would hurt, not help, developing countries

Sep 07, 2010

Allowing developing countries to increase import tariffs based on price and supply triggers under proposed World Trade Organization rules would actually harm those countries, according to a Purdue University economic analysis.

Recommended for you

Awakening the potential of plasma acceleration

7 hours ago

Civil engineering has begun for the new Proton Driven Plasma Wakefield Acceleration Experiment (AWAKE) at CERN. This proof-of-principle experiment will harness the power of wakefields generated by proton ...

Magnetic memories on the right track

7 hours ago

Computer hard drives store data by writing magnetic information onto their surfaces. In the future, magnetic effects may also be used to improve active memory in computers, potentially eliminating the need ...

When an exciton acts like a hole

9 hours ago

(Phys.org) —When is an electron hole like a quasiparticle (QP)? More specifically, what happens when a single electron hole is doped into a two-dimensional quantum antiferromagnet? Quasiparticle phenomena ...

User comments : 2

Adjust slider to filter visible comments by rank

Display comments: newest first

1 / 5 (2) Nov 25, 2010
Why would the results be surprising? The Netherlands, Belgium, Luxembourg, France, Italy, and West Germany were the original founding states of the predecessor of the current EU, which has caused a large entanglement of their economies for several reasons. The global role of the EU does the rest.

Or am I missing something here?
2 / 5 (2) Nov 25, 2010
these are the same statisticians that rationalized there way towards securitizing all major global debt markets. the bottom line, is that economics isn't complicated. it's made complicated in order to deceive, which is done to make money. so this study is just bunk.