A Model to Analyse Financial Fragility: Applications

Dimitrios Tsomocos, Charles A.E. Goodhart and Pojanart Sunirand

No 2004-FE-05, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: The purpose of our work is to explore contagious financial crises. To this end, we use simplified, thus numerically solvable, versions of our general model [Goodhart, Sunirand and Tsomocos (2003)]. The model incorporates heterogeneous agents, banks and endogenous default, thus allowing various feedback and contagion channels to operate in equilibrium. Such a model leads to di.erent results from those obtained when using a standard representative agent model. For example, there may be a trade-o. between e.ciency and financial stability, not only for regulatory policies, but also for monetary policy. Moreover, agents which have more investment opportunities can deal with negative shocks more effectively by transferring ‘negative externalities’ onto others.

Keywords: Financial Fragility; Competitive Banking; General Equilibrium; Monetary Policy; Regulatory Policy (search for similar items in EconPapers)
JEL-codes: D52 E4 E5 G1 G2 (search for similar items in EconPapers)
Date: 2004-02-01
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Citations: View citations in EconPapers (63)

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Related works:
Journal Article: A model to analyse financial fragility: applications (2004)
Working Paper: A model to analyse financial fragility: applications (2004)
Working Paper: A Model to Analyse Financial Fragility: Applications (2004)
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