Advertisement

Financial Fragility and Interacting Units: an Exercise

  • Carl Chiarella
  • Simone Giansante
  • Serena Sordi
  • Alessandro Vercelli
Part of the New Economic Windows book series (NEW)

Abstract

This paper assumes that financial fluctuations are the result of the dynamic interaction between liquidity and solvency conditions of individual financial units. The framework is designed as a heterogeneous agent model which proceeds through discrete time steps within a finite time horizon. The interaction at the microlevel between financial units and the market maker, who is in charge of clearing the market, produces interesting complex dynamics. The model is analyzed by means of numerical simulations and agent-based computational economics (ACE) approach. The behaviour and evolution of financial units are studied for different parameter regimes in order to show the importance of the parameter setting in the emergence of complex dynamics. Monetary policy implications for the banking sector are also discussed.

Keywords

Interest Rate Banking Sector Demand Curve Nominal Interest Rate Solvency Condition 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Chiarella, C., Dieci, R. & He, X.-Z. (2007), ‘Heterogeneous expectations and speculative behavior in a dynamic multi-asset framework’, Journal of Economic Behavior and Organization 62, 408–427CrossRefGoogle Scholar
  2. Day, R. & Huang, W. (1990), ‘Bulls, bears and market sheep’, Journal of Economic Behavior and Organization 14(3), 299–329CrossRefGoogle Scholar
  3. Dieci, R., Sordi, S. & Vercelli, A. (2006), ‘Financial fragility and global dynamics’, Chaos, Solitons and Fractals 29(3), 595–610MathSciNetMATHCrossRefGoogle Scholar
  4. Sordi, S. & Vercelli, A. (2006), ‘Financial fragility and economic fluctuations’, Journal of Economic Behavior and Organization 61(4), 543–561CrossRefGoogle Scholar
  5. Vercelli, A. (2000), ‘Structural financial instability and cyclical fluctuations’, Structural Change and Economic Dynamics 11(1–2), 139–156CrossRefGoogle Scholar

Copyright information

© Springer-Verlag Italia 2010

Authors and Affiliations

  • Carl Chiarella
    • 1
  • Simone Giansante
    • 2
    • 3
  • Serena Sordi
    • 3
  • Alessandro Vercelli
    • 3
  1. 1.School of Finance and EconomicsUniversity of Technology SydneySydneyAustralia
  2. 2.Department of EconomicsUniversity of EssexUK
  3. 3.Department of Economic Policy, Finance and Development (DEPFID)University of SienaSienaItaly

Personalised recommendations