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Structural contagion and vulnerability to unexpected liquidity shortfalls


Reference:

Giansante, S., Chiarella, C., Sordi, S. and Vercelli, A., 2012. Structural contagion and vulnerability to unexpected liquidity shortfalls. Journal of Economic Behavior and Organization, 83 (3), 558–569.

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    Official URL:

    http://dx.doi.org/10.1016/j.jebo.2012.05.014

    Abstract

    This paper assumes that financial fluctuations are the result of the dynamic interaction between liquidity and solvency conditions of individual economic units. The framework is an extention of Sordi and Vercelli (this issue) designed as an heterogeneous agent model which proceeds through discrete time steps within a finite time horizon. The interaction at the micro-level between economic units monitors the spread of contagion and systemic risk, producing interesting complex dynamics. The model is analyzed by means of numerical simulations and systemic risk modelling, where local interaction of units is captured and analysed by the bilateral provision of liquidity among units. The behavior and evolution of economic units are studied for different parameter regimes in order to investigate the relation between units' expectations, liquidity regimes and contagion. Liquidity policy implications are briefly discussed.

    Details

    Item Type Articles
    CreatorsGiansante, S., Chiarella, C., Sordi, S. and Vercelli, A.
    DOI10.1016/j.jebo.2012.05.014
    Uncontrolled Keywordsfinancial fluctuations, contagion, systemic risk, heterogeneous agents, complex dynamics
    DepartmentsSchool of Management
    Publisher StatementGiansante_JEBO_2012_iii.pdf: NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Economic Behavior & Organization. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Economic Behavior & Organization, vol 83, issue 3, 2012, DOI 10.1016/j.jebo.2012.05.014
    RefereedYes
    StatusPublished
    ID Code30032

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