EconPapers    
Economics at your fingertips  
 

Macroprudential policies in an agent-based artificial economy

Marco Raberto (), Andrea Teglio and Silvano Cincotti ()

No 2012/05, Working Papers from Economics Department, Universitat Jaume I, Castellón (Spain)

Abstract: Basel III is a recently-agreed regulatory standard for bank capital adequacy with focus on the macroprudential dimension of banking regulation, i.e., the system-wide implications of banks' lending and risk. An important Basel III provision is to reduce procyclicality of present banking regulation and promote countercyclical capital buffers for banks. The Eurace agent-based macroeconomic model and simulator has been recently showed to be able to reproduce a credit-fueled boom-bust dynamics where excessive bank leverages, while benefitting in the short term, have destabilizing effects in the medium-long. In this paper. we employ the Eurace model to test regulatory policies providing time varying capital requirements for banks, based on mechanisms that enforce banks to build up or release capital buffers, according to the overall conditions of the economy. As conditioning variables for these dynamic policies, both the unemployment rate and the aggregate credit growth have been considered. Results show that the dynamic regulation of capital requirements is generally more successful than fixed tight capital requirements in stabilizing the economy and improving the macroeconomic performance.

Keywords: Basel III; macroprudential regulation; agent-based models and simulation (search for similar items in EconPapers)
Pages: 24 pages
Date: 2012
New Economics Papers: this item is included in nep-ban, nep-cmp, nep-reg and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22) Track citations by RSS feed

Downloads: (external link)
http://www.doctreballeco.uji.es/wpficheros/rabertoetal2012.pdf (application/pdf)

Related works:
Journal Article: Macroprudential Policies in an Agent-Based Artificial Economy (2012) Downloads
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:jau:wpaper:2012/05

Access Statistics for this paper

More papers in Working Papers from Economics Department, Universitat Jaume I, Castellón (Spain) Contact information at EDIRC.
Bibliographic data for series maintained by María Aurora Garcia Gallego ().

 
Page updated 2021-10-24
Handle: RePEc:jau:wpaper:2012/05