Financial regulations and bank credit to the real economy

Gabbi, Giampaolo; Iori, Giulia; Jafarey, Saqib; Porter, James

doi:10.1016/j.jedc.2014.07.002

Cited by 39 publications

(24 citation statements)

References 18 publications

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“…Mechanisms for the transmission of information and asymmetric information information have impacts on market quality 1,52,84,85,89,104,105,111 . Thus, Regulators can impact the activity and success of all the other actors, either directly or indirectly through knock-on effects.…”

Section: Top-down Causation Via Feedback Control Of Adaptive Goalsmentioning

confidence: 99%

Hierarchical Causality in Financial Economics

Wilcox

Gebbie

2014

SSRN Journal

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Hierarchical analysis is considered and a multilevel model is presented in order to explore causality, chance and complexity in financial economics. A coupled system of models is used to describe multilevel interactions, consistent with market data: the lowest level is occupied by agents generating the prices of individual traded assets; the next level entails aggregation of stocks into markets; the third level combines shared risk factors with information variables and bottom-up, agent-generated structure, consistent with conditions for no-arbitrage pricing theory; the fourth level describes market factors which originate in the greater economy and the highest levels are described by regulated market structure and the customs and ethics which define the nature of acceptable transactions. A mechanism for emergence or innovation is considered and causal sources are discussed in terms of five causation classes.

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Section: Top-down Causation Via Feedback Control Of Adaptive Goalsmentioning

confidence: 99%

Hierarchical Causality in Financial Economics

Wilcox

Gebbie

2014

SSRN Journal

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“…27 An increasing number of ABM analyze the connections between bank and firm networks and macroeconomic performance. Gabbi et al (2015) add a stylized real sector to an ABM of the banking network and study the impact of some macroprudential regulations (e.g. countercyclical capital buffers).…”

Section: Financial Instability Bank Regulation and Macroprudential Pmentioning

confidence: 99%

Macroeconomic Policy in DSGE and Agent-Based Models Redux: New Developments and Challenges Ahead

Fagiolo

Roventini

2016

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe Great Recession seems to be a natural experiment for economic analysis, in that it has shown the inadequacy of the predominant theoretical framework -the New Neoclassical Synthesis (NNS) -grounded on the DSGE model. In this paper, we present a critical discussion of the theoretical, empirical and political-economy pitfalls of the DSGE-based approach to policy analysis. We suggest that a more fruitful research avenue should escape the strong theoretical requirements of NNS models (e.g., equilibrium, rationality, representative agent, etc.) and consider the economy as a complex evolving system, i.e. as an ecology populated by heterogenous agents, whose far-from-equilibrium interactions continuously change the structure of the system. This is indeed the methodological core of agent-based computational economics (ACE), which is presented in this paper. We also discuss how ACE has been applied to policy analysis issues, and we provide a survey of macroeconomic policy applications (fiscal and monetary policy, bank regulation, labor market structural reforms and climate change interventions). Finally, we conclude by discussing the methodological status of ACE, as well as the problems it raises.

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“…As an example for the first option we study Basel III with capital surcharges for G-SIBs and compare it with an example for the second option -the SRT that leads to a self-organized re-structuring of financial networks. A number of ABMs have been used recently to study interactions between the financial system and the real economy, focusing on destabilizing feedback loops between the two sectors [26,[28][29][30][31][32][33]. We study the different options for the regulation of SR within the framework of the CRISIS macro-financial model 1 .…”

Section: Introductionmentioning

confidence: 99%

Basel III capital surcharges for G-SIBs are far less effective in managing systemic risk in comparison to network-based, systemic risk-dependent financial transaction taxes

Poledna

Bochmann

Thurner

2017

Journal of Economic Dynamics and Control

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In addition to constraining bilateral exposures of financial institutions, there are essentially two options for future financial regulation of systemic risk (SR): First, financial regulation could attempt to reduce the financial fragility of global or domestic systemically important financial institutions (G-SIBs or D-SIBs), as for instance proposed in Basel III. Second, future financial regulation could attempt strengthening the financial system as a whole. This can be achieved by re-shaping the topology of financial networks. We use an agent-based model (ABM) of a financial system and the real economy to study and compare the consequences of these two options. By conducting three "computer experiments" with the ABM we find that re-shaping financial networks is more effective and efficient than reducing leverage. Capital surcharges for G-SIBs can reduce SR, but must be larger than those specified in Basel III in order to have a measurable impact. This can cause a loss of efficiency. Basel III capital surcharges for G-SIBs can have pro-cyclical side effects.

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Financial regulations and bank credit to the real economy

Cited by 39 publications

References 18 publications

Hierarchical Causality in Financial Economics

Hierarchical Causality in Financial Economics

Macroeconomic Policy in DSGE and Agent-Based Models Redux: New Developments and Challenges Ahead

Basel III capital surcharges for G-SIBs are far less effective in managing systemic risk in comparison to network-based, systemic risk-dependent financial transaction taxes

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