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Long Term Impacts of Bank Behavior on Financial Stability An Agent Based Modeling Approach

Unpublished
Submitted: Oct 13, 2015
Last Updated: Oct 13, 2015
21 Downloads (1 Download in the last 3 months)

This paper presents an agent-based model aiming to shed light on the potential destabilizing effects of bank behavior. Our work takes its motivation from the effects of the financial crisis which erupted in 2007 in the US. It draws on the Financial Instability Hypothesis by Hyman P. Minsky, and on the Agent Based macro modeling literature (Delli Gatti et al. 2010, Riccetti et. al 2013) to model a simplified economy in which heterogeneous banks and firms interact on game theoretic rules. Simulation results suggest that aggregate financial instability may emerge as the outcome of banks’ attempt to increase their profit or market share through their pricing strategies. A further finding from the model is the need for banks to take into account time consistency when issuing credit in order to protect the financial stability of the system.

This model is associated with a publication:

The paper of this model is in progress for publishing in Journal of Artificial Societies and Social Simulation (JASSS).

 

Model Status

This model is currently unpublished.

Model Version: 1
Version Notes:

The base model version is uploaded. Models for other scenarios are not uploaded as they can be achieved with simple changes in the base model.

Platform:
C++
Programming Language: C++
Operating System: Microsoft Windows
Licensed Under: Academic Free License 3.0
Instructions on Running This Model:
Open the model_iarslan_131015 C++ Solution file. You must change file directories in economy.h file with suitable directories. The results will be written to related txt files. You can analyze the results with programs like R, Matlab or Excel.

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