Abstract
This study is an exploratory analysis of the economic role of banks under different prudential frameworks. It considers an agent-based computational model populated by consumers, firms, banks, and a central bank whose out-of-equilibrium interactions replicate the conjunct dynamics of a banking system, a financial market and the real economy. A calibrated version of the model is shown to provide an intelligible account of several recurring economic phenomena, thus constituting a favorable ground for policy analysis. The investigation provides a valuable methodological contribution to the field of banking research and sheds new light on the role of banks and their prudential regulation. Specifically, the results suggest that banks are key economic agents. Through their financial intermediation activity, credit institutions facilitate investment and promote growth.
References
Allen, F., and Gale, D. (2007). Understanding the Financial Crisis. Oxford: Oxford University Press.Search in Google Scholar
Arthur, B. (2006). Out-of-Equilibrium Economics and Agent-Based Modeling. In: L. Tesfatsion, and L. Judd (eds). Handbook of Computational Economics. Elsevier Science. http://www.sciencedirect.com/science/article/pii/S1574002105020320Search in Google Scholar
Ashraf, Q., Gershman, B., and Howitt, P. (2011). Banks, Market Organization, and Macroeconomic Performance: An Agent-based Computational Analysis. Working Paper 17102. National Bureau of Economic Research. http://www.nber.org/papers/w1710210.3386/w17102Search in Google Scholar
Bartelsman E., and Scarpetta S. (2005). Comparative Analysis of Demographics and Survival: Evidence from Micro-level Sources in OECD countries. Industrial and Corporate Change 14(3): 365–391. http://icc.oxfordjournals.org/content/14/3/365.short10.1093/icc/dth057Search in Google Scholar
Bernanke, B., Gertler M., and Gilchrist S. (1996). The Financial Accelerator and the Flight to Quality. Review of Economics and Statistics 78(1): 1–15.ideas.repec.org/a/tpr/restat/v78y1996i1p1-15.html10.2307/2109844Search in Google Scholar
Carmassi, J., and Micossi, S. (2012). Time to Set Banking Regulation Right. CEPS Paperback, Centre for European Policy Studies, Brussels. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=202888110.2139/ssrn.2028881Search in Google Scholar
Cincotti, S. (2012). Macroprudential Policies in an Agent-Based Artificial Economy. Revue de l’OFCE 5: 205–234. http://repositori.uji.es/xmlui/handle/10234/8340610.3917/reof.124.0205Search in Google Scholar
Delli Gatti, D., Gallegati M., and Greenwald B. (2010). The Financial Accelerator in an Evolving Credit Network. Journal of Economic Dynamics and Control 34(9): 1627–1650. http://www.sciencedirect.com/science/article/pii/S0165188910001491Search in Google Scholar
Dewatripont, M., and Tirole, J. (1994). The Prudential Regulation of Banks. Cambridge, MA: MIT Press.Search in Google Scholar
Diamond, D. (1996). Financial Intermediation as Delegated Monitoring: A Simple Example. Federal Reserve of Richmond Quarterly Review 82(3): 51–66. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2125936Search in Google Scholar
Diamond, D., and Dybvig, P. (1986). Banking Theory, Deposit Insurance and Bank Regulation. Journal of Business 59: 53–68. http://www.jstor.org/stable/2352687?seq=1-%20page_scan_tab_contents#page_scan_tab_contents10.1086/296314Search in Google Scholar
Diamond, D., and Dybvig, P. (1983). Bank Runs, Deposit Insurance and Liquidity. Journal of Political Economy 91(3): 401–419. http://www.jstor.org/stable/1837095?seq=1-%20page_scan_tab_contents#page_scan_tab_contents10.1086/261155Search in Google Scholar
Freixas, X., and Rochet,J.-C. (2008). Microeconomics of Banking. MIT Press.Search in Google Scholar
Kaldor, N. (1957). A model of economic growth. The economic journal, 67(268): 591-624. http://www.jstor.org/stable/222770410.2307/2227704Search in Google Scholar
King, R.G., and Rebelo, S.T. (1999). Resuscitating Real Business Cycles. In: M. Woodford and J. Taylor (eds.), Handbook of Macroeconomics 1. Elsevier. http://www.sciencedirect.com/science/article/pii/S1574004899100223Search in Google Scholar
Kirman, A. (2010). The Economic Crisis is a Crisis for Economic Theory. CESifo Economic Studies 56(4): 498–535. http://cesifo.oxfordjournals.org/content/56/4/498.short10.1093/cesifo/ifq017Search in Google Scholar
Le Leslé, V., and Avramova, S. (2012). Revisiting Risk-Weighted Assets. IMF Working Paper No. 12/90. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=205026310.2139/ssrn.2050263Search in Google Scholar
MacKinnon, J. G. (1996). Numerical distribution functions for unit root and cointegration tests. Journal of applied econometrics: 601-618. http://www.jstor.org/stable/2285154?seq=1#page_scan_tab_contents10.1002/(SICI)1099-1255(199611)11:6<601::AID-JAE417>3.0.CO;2-TSearch in Google Scholar
Moody’s (2011). Corporate Default and Recovery Rates, 1920–2010. Moody’s Investors Service.Search in Google Scholar
Raberto, M., Teglio, A., and Cincotti, S. (2012). Debt, Deleveraging and Business Cycles: an Agent-Based Perspective. Economics: The Open-Access, Open-Assessment EJournal, 6 (2012-27): 1–49. http://dx.doi.org/10.5018/economics-ejournal.ja.2012-2710.5018/economics-ejournal.ja.2012-27Search in Google Scholar
Ravn, M.O., and Uhlig H. (2002). On Adjusting the Hodrick-Prescott Filter for the Frequency of Observations. The Review of Economics and Statistics 84(2): 371–375. http://faculty.georgetown.edu/mh5/class/econ489/Ravn-Uhlig.pdf10.1162/003465302317411604Search in Google Scholar
Santos, J.A. (2001). Bank Capital Regulation in Contemporary Banking Theory: A Review of the Literature. Financial Markets, Institutions & Instruments 10(2): 41–84. http://onlinelibrary.wiley.com/doi/10.1111/1468-0416.00042/abstract10.1111/1468-0416.00042Search in Google Scholar
Takahashi, I., and Okada I. (2003). Monetary Policy and Banks’ Loan Supply Rules to Harness Asset Bubbles and Crashes. Multi-Agent-Based Simulation III. Springer Berlin Heidelberg.10.1007/978-3-540-24613-8_7Search in Google Scholar
Taylor, J. (2007). The Explanatory Power of Monetary Policy Rules. Business Economics 42(4): 8–15. http://link.springer.com/article/10.2145/2007040110.2145/20070401Search in Google Scholar
Tedeschi, G., Mazloumian, A., Gallegati, M., and Helbing, D. (2012). Bankruptcy Cascades in Interbank Markets. PloS one 7(12): e52749. http://journals.plos.org/plosone/article?id=10.1371/journal.pone.005274910.1371/journal.pone.0052749Search in Google Scholar
Tesfatsion, L. (2006). Agent-Based Computational Economics: A Constructive Approach to Economic Theory. Handbook of Computational Economics, Vol. 2: Agent-Based Computational Economics. North-Holland/Elsevier.Search in Google Scholar
The Economist (2013). The Origins of the Financial Crisis: Crash Course. September 7. http://www.economist.com/news/schoolsbrief/21584534-effects-financial-crisis-arestill- being-felt-five-years-articleSearch in Google Scholar
© 2016 Pedro Dias Quinaz et al., published by Sciendo
This work is licensed under the Creative Commons Attribution 4.0 International License.
