IDENTIFICATION AND MONITORING OF INSTABILITY IN FINANCIAL SYSTEMS

Bogdan Wlodarczyk () and Marek Szturo ()
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Bogdan Wlodarczyk: Department of Macroeconomics Faculty of Economics University of Warmia and Mazury in Olsztyn
Marek Szturo: Department of Finance and Banking Faculty of Economics University of Warmia and Mazury in Olsztyn

OLSZTYN ECONOMIC JOURNAL, 2016, vol. 11, issue 2, 177-188

Abstract: Financial instability is often the result of a positive feedback loop, which is an inseparable element of the functioning of the financial system.The task dealing with identification, modeling and analyzing the causes and effects of such feedback loops requires assuming a systems’ engineering perspective, which is rarely taken into consideration when designing remedial solutions. The aim of the study was to evaluate how it is possible to identify and monitor the susceptibility of a financial system to potential threats. The popular method of data modeling known as signed directed graphs (SDG) was used. The method is able to pick up information which is not taken into account by a traditional network model of the financial system. It provides essential information about the direction of impact and control between the nodes. Thanks to this technique, it is possible to analyze the potential instability spots of the system.

Keywords: financial system; financial instability; systems engineering (search for similar items in EconPapers)
JEL-codes: A1 G0 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:ole:journl:v:11:y:2016:i:2:p:177-188

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