The financial network channel of monetary policy transmission: an agent-based model

Michel Alexandre, Gilberto Lima, Luca Riccetti and Alberto Russo

Journal of Economic Interaction and Coordination, 2023, vol. 18, issue 3, No 4, 533-571

Abstract: Abstract The purpose of this paper is to explore the impact of monetary policy shocks on a financial network, which we dub the “financial network channel of monetary policy transmission”. To this aim, we develop a agent-based model (ABM) in which banks extend loans to firms. The resulting bank–firm credit network is structured as determined by plausible behavioral assumptions, with both firms and banks being always willing to close a credit deal with the network partner perceived to be less risky. As our ABM succeeds in reproducing several key stylized facts of bank–firm credit networks, we then assess through simulations how exogenous shocks to the policy interest rate affect some key topological measures of the bank–firm credit network (density, assortativity, size of largest component, and degree distribution). Our simulations show that such topological features of the bank–firm credit network are significantly affected by shocks to the policy interest rate, with such an impact varying quantitatively and qualitatively with the sign, magnitude, and duration of the shocks.

Keywords: Financial network; Monetary policy shocks; Agent-based modeling (search for similar items in EconPapers)
JEL-codes: C63 E51 E52 G21 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s11403-023-00377-w Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: The financial network channel of monetary policy transmission: An agent-based model (2022)
Working Paper: The Financial Network Channel of Monetary Policy Transmission: An Agent-Based Model (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jeicoo:v:18:y:2023:i:3:d:10.1007_s11403-023-00377-w

Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/11403/PS2

DOI: 10.1007/s11403-023-00377-w

Access Statistics for this article

Journal of Economic Interaction and Coordination is currently edited by A. Namatame, Thomas Lux and Shu-Heng Chen

More articles in Journal of Economic Interaction and Coordination from Springer, Society for Economic Science with Heterogeneous Interacting Agents Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().