Interbank network and regulation policies: an analysis through agent-based simulations with adaptive learning

Ricardo Vieira Barroso, Joaquim Ignacio Alves Vasconcellos Lima, Alexandre Henrique Lucchetti and Daniel Cajueiro

MPRA Paper from University Library of Munich, Germany

Abstract: We develop an agent-based model to study the impacts of a broad range of regulation policies over the banking system. It builds on an iterated version of the \citet{DiamondDybvig1983} framework and resorts to the experience-weighted attraction learning scheme of \citet{CamererHo1999} to model agents' adaptive learning. Thereby, we can capture not only the direct impacts of regulation policies, but also the ones that take part through shifting agents' adaptive strategies. Our results show that the introduction of an interbank clearinghouse is a good instrument to face the risk of contagion; the regulatory guidelines of the Basel Accord are effective in reducing the probability of bank failure; and the adoption of a deposit insurance can be adequate to avoid bank runs. However, we also show that these policies have drawbacks, and can either reduce bank activity or stimulate moral hazard.

Keywords: Interbank network; regulation; agent-based model; adaptive learning (search for similar items in EconPapers)
JEL-codes: E58 G18 G2 G28 (search for similar items in EconPapers)
Date: 2016-07-15
New Economics Papers: this item is included in nep-cmp and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:73308

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