Modelling interdependencies between the electricity and information infrastructures

The aim of this paper is to provide qualitative models characterizing interdependencies related failures of two critical infrastructures: the electricity infrastructure and the associated information infrastructure. The interdependencies of these two infrastructures are increasing due to a growing connection of the power grid networks to the global information infrastructure, as a consequence of market deregulation and opening. These interdependencies increase the risk of failures. We focus on cascading, escalating and common-cause failures, which correspond to the main causes of failures due to interdependencies. We address failures in the electricity infrastructure, in combination with accidental failures in the information infrastructure, then we show briefly how malicious attacks in the information infrastructure can be addressed

Sources and propagation of international cycles: Common shocks or transmission?

This paper studies the generation and transmission of international cycles in a multi-country model with production and consumption interdependencies. Two sources of disturbance are considered and three channels of propagation are compared. In the short run the contemporaneous correlation of disturbances determines the main features of the transmission. In the medium run production interdependencies account for the transmission of technology shocks and consumption interdependencies account for the transmission of government shocks. Technology disturbances, which are mildly correlated across countries, are more successful than government expenditure disturbances in reproducing actual data. The model also accounts for the low cross country consumption correlations observed in the data.Technology and government disturbances, production interdependencies, consumption interdependencies, transmission

Enhancing Infrastructure Resilience Under Conditions of Incomplete Knowledge of Interdependencies

Today’s infrastructures — such as road, rail, gas, electricity and ICT — are highly interdependent, and may best be viewed as multi-infrastructure systems. A key challenge in seeking to enhance the resilience of multi-infrastructure systems in practice relates to the fact that many interdependencies may be unknown to the operators of these infrastructures. How can we foster infrastructure resilience lacking complete knowledge of interdependencies? In addressing this question, we conceptualize the situation of a hypothetical infrastructure operator faced with incomplete knowledge of the interdependencies to which his infrastructure is exposed. Using a computer model which explicitly represents failure propagations and cascades within a multi-infrastructure system, we seek to identify robust investment strategies on the part of the operator to enhance infrastructure resilience. Our results show that a strategy of constructing redundant interdependencies may be the most robust option for a financially constrained infrastructure operator. These results are specific to the infrastructure configuration tested. However, the developed model may be tailored to the conditions of real-world infrastructure operators faced with a similar dilemma, ultimately helping to foster resilient infrastructures in an uncertain world

Self-protection and insurance with interdependencies

We study optimal investment in self-protection of insured individuals when they face interdependencies in the form of potential contamination from others. If individuals cannot coordinate their actions, then the positive externality of investing in self-protection implies that, in equilibrium, individuals underinvest in self-protection. Limiting insurance coverage through deductibles or selling “at-fault” insurance can partially internalize this externality and thereby improve individual and social welfare. JEL Classification: C72, D62, D8

Ranking the economic importance of countries and industries

In the current era of worldwide market interdependencies, the global financial village has become increasingly vulnerable to systemic collapse. The global financial crisis has highlighted the necessity of understanding and quantifying the interdependencies among the world’s economies; developing new, effective approaches for risk evaluation; and providing mitigating solutions. We present a methodological framework for quantifying interdependencies in the global market and for evaluating risk levels in the worldwide financial network. The resulting information will enable policy and decision makers to better measure, understand and maintain financial stability. We use this methodology to rank the economic importance of each industry and country according to the global damage that would result from its failure. Our quantitative results shed new light on China’s increasing economic dominance over other economies, including that of the United States, as well as the global economy

Collaborative design : managing task interdependencies and multiple perspectives

This paper focuses on two characteristics of collaborative design with respect to cooperative work: the importance of work interdependencies linked to the nature of design problems; and the fundamental function of design cooperative work arrangement which is the confrontation and combination of perspectives. These two intrinsic characteristics of the design work stress specific cooperative processes: coordination processes in order to manage task interdependencies, establishment of common ground and negotiation mechanisms in order to manage the integration of multiple perspectives in design

Robust Global Stock Market Interdependencies

In this paper, we examine the scope for international stock portfolio diversification, from the viewpoint of a United States representative investor, in regard to both the Asian and theEuropean stock markets. Our findings indicate that despite correlation style evidence to thecontrary, the European stock markets provide a superior long-term diversification opportunity relative to that provided by the Asian stock markets. Hence, a short-term measurement of interdependence appears to be uninformative with respect to the diversification opportunities of investors with longer term investment horizons. In terms of methodology, we adopt common stochastic trend tests, including a common stochastic trend test which accounts for generalised autoregressive conditional heteroskedasticity effects in conjunction with the recursive estimation of these tests to estimate the development of longterm stock market interdependence linkages. Recursively estimated robust correlations between the international stock markets are utilised to reveal the nature of short-term stock market interdependence linkages.Stock Market Linkages, Portfolio Diversification, Correlation, Cointegration