Systemic Risk: The Dynamics of Modern Financial Systems by Prasanna Gai

By Prasanna Gai

This publication opens new flooring within the examine of economic crises. It treats the economic climate as a fancy adaptive method and exhibits how classes from community disciplines - equivalent to ecology, epidemiology, and statistical mechanics - make clear our realizing of monetary balance. utilizing instruments from community concept and economics, it means that monetary structures are robust-yet-fragile, with knife-edge homes which are vastly exacerbated by means of the hoarding of cash and the fireplace sale of resources via banks. The publication reviews the harmful community results of the failure of enormous inter-connected associations, explains how key investment markets can grab up around the complete economic system, and exhibits how the pursuit of secured finance through banks within the wake of the worldwide monetary quandary can generate systemic dangers. The insights are then used to version banking platforms calibrated to info to demonstrate how monetary region regulators are commencing to quantify economic climate stress.

Show description

Read Online or Download Systemic Risk: The Dynamics of Modern Financial Systems PDF

Similar macroeconomics books

Modern Macroeconomics

Greater than a decade after the booklet of the significantly acclaimed a contemporary advisor to Macroeconomics, Brian Snowdon and Howard Vane have produced a priceless successor within the type of glossy Macroeconomics. completely prolonged, revised and up-to-date, it is going to turn into the quintessential textual content for college kids and academics of macroeconomics within the new millennium.

Macroeconomics

Mankiw’s Macroeconomics has been the #1 booklet for the intermediate macro path because the ebook of the 1st variation. It continues that bestselling prestige by means of always bringing the vanguard of macroeconomics concept, study, and coverage to the study room, explaining advanced techniques with remarkable readability.

Reformist Voices of Islam: Mediating Islam and Modernity

In recent times, Islamic fundamentalist, progressive, and jihadist routine have overshadowed extra average and reformist voices and developments inside of Islam. This compelling quantity introduces the present new release of reformist thinkers and activists, the highbrow traditions they bring on, and the explanations for the failure of reformist hobbies to maintain extensive aid within the Islamic international this day.

Unemployment Fluctuations and Stabilization Policies: A New Keynesian Perspective (Zeuthen Lectures)

The earlier fifteen years have witnessed the increase of the recent Keynesian version as a framework of reference for the research of fluctuations and stabilization rules. That framework, which mixes the rigor and inner consistency of dynamic common equilibrium types with such generally Keynesian assumptions as monopolistic pageant and nominal rigidities, makes attainable a significant, welfare-based research of the results of economic coverage ideas.

Extra resources for Systemic Risk: The Dynamics of Modern Financial Systems

Sample text

So assuming l to have a value at (or close) unity provides a simple way of capturing a rich set of dynamics that operate through forward-looking expectations. Accordingly, bank i loses lmi LIB i of its liabilities due to liquidity hoarding by its counterparties in the network. 2 Contagion dynamics The dynamics of contagion in the model are similar to Chapter 2. 3) it is now apparent that the decision by any one bank to hoard liquidity makes it harder for the banks which were previously borrowing from it to meet their own liquidity condition without resorting to hoarding themselves.

Unlike Chapter 2, the links that form real-world financial systems do not follow a Poisson distribution. Rather, as we have already noted, the evidence suggests that linkages are fat-tailed, with a small number of key nodes that are very highly connected both in terms of the number of interbank relationships they have and in terms of the overall value of those relationships. The framework is then used to clarify several topical policy issues. For example, time-varying liquidity requirements and core funding ratios have been proposed as possible tools for conducting ‘macroprudential’ policy.

Since it captures links between vulnerable banks, the size and distribution of the vulnerable cluster describes how default spreads across the financial network following an initial failure. 2 shows, each vulnerable cluster (represented by a square) can take many different forms. We could follow a randomly chosen outgoing link and find a single bank at its end with no further outgoing connections emanating from it. This bank may be safe (s) or vulnerable (v). Or we could find a vulnerable bank with one, two, or more links emanating from it to further clusters.

Download PDF sample

Rated 4.30 of 5 – based on 39 votes