A Model to Analyse Financial Fragility: Applications
Charles A.E. Goodhart,
Pojanart Sunirand and
OFRC Working Papers Series from Oxford Financial Research Centre
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 different results from those obtained when using a standard representative agent model. For example, there may be a trade-off between effciency 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 e?ectively by transferring â€˜negative externalitiesâ€™ onto others.
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Journal Article: A model to analyse financial fragility: applications (2004)
Working Paper: A model to analyse financial fragility: applications (2004)
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