How banks’ strategies influence financial cycles: An approach to identifying micro behavior

Simone Berardi () and Gabriele Tedeschi
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Simone Berardi: LEE and Department of Economics, Universitat Jaume I, Castellón, Spain

No 2016/24, Working Papers from Economics Department, Universitat Jaume I, Castellón (Spain)

Abstract: In this paper, we show that the values of parameters of a well-calibrated model are useful in detecting micro behavior. We use a calibration procedure suitable for validating agent-based models to show how the evolution of model parameters, obtained via a rolling window estimation, illustrates the evolution of agents’ strategies in response to different economic conditions. In this regard, we calibrate the well-known financial model of Brock and Hommes using three banking indices (i.e., the S&P SmallCap 600 Financials Index, the STOXX Europe 600 Banks, and the STOXX Asia/Pacific 600 Banks) running from 1994 to 2016. The choice of a spatially and temporally diversified dataset allows us to analyze differences and similarities in the behavior of banks belonging to the different macro areas, as well as to capture agents’ reaction to the several economic phases characterizing the time series investigated.

Keywords: Microfoundations; validation; agent-based models; heterogeneous beliefs (search for similar items in EconPapers)
JEL-codes: C52 C63 G15 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2016
New Economics Papers: this item is included in nep-cmp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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