Fischer, Thomas ; Riedler, Jesper (2012)
Prices, Debt and Market Structure in an Agent-Based Model of the Financial Market.
In: ZEW Discussion Papers, (12-045)
Artikel, Bibliographie
Kurzbeschreibung (Abstract)
We develop an agent-based model in which heterogenous and boundedly rational agents interact by trading a risky asset at an endogenously set price. Agents are endowed with balance sheets comprising the risky asset as well as cash on the asset side and equity capital as well as debt on the liabilities side. The introduction of balance sheets and debt into an agent-based setup is relatively new to the literature and allows us to tackle several research questions that are mostly inaccessible following conventional methodology, especially representative agent models. A number of findings emerge when simulating the model. We find that the empirically observable log-normal distribution of bank balance sheet size naturally emerges and that higher levels of leverage lead to a greater inequality among agents. When further analyzing the relationship between leverage and balance sheets, we observe that decreasing credit frictions result in an increasingly procyclical behavior of leverage, which is typical for investment banks. We show how decreasing credit frictions increase volatility but decrease the number of bankruptcies.
JEL classification: C63 - D53 - D84
| Typ des Eintrags: | Artikel | ||||
|---|---|---|---|---|---|
| Erschienen: | 2012 | ||||
| Autor(en): | Fischer, Thomas ; Riedler, Jesper | ||||
| Art des Eintrags: | Bibliographie | ||||
| Titel: | Prices, Debt and Market Structure in an Agent-Based Model of the Financial Market | ||||
| Sprache: | Englisch | ||||
| Publikationsjahr: | 13 Juli 2012 | ||||
| Titel der Zeitschrift, Zeitung oder Schriftenreihe: | ZEW Discussion Papers | ||||
| (Heft-)Nummer: | 12-045 | ||||
| URL / URN: | http://ftp.zew.de/pub/zew-docs/dp/dp12045.pdf | ||||
| Kurzbeschreibung (Abstract): | We develop an agent-based model in which heterogenous and boundedly rational agents interact by trading a risky asset at an endogenously set price. Agents are endowed with balance sheets comprising the risky asset as well as cash on the asset side and equity capital as well as debt on the liabilities side. The introduction of balance sheets and debt into an agent-based setup is relatively new to the literature and allows us to tackle several research questions that are mostly inaccessible following conventional methodology, especially representative agent models. A number of findings emerge when simulating the model. We find that the empirically observable log-normal distribution of bank balance sheet size naturally emerges and that higher levels of leverage lead to a greater inequality among agents. When further analyzing the relationship between leverage and balance sheets, we observe that decreasing credit frictions result in an increasingly procyclical behavior of leverage, which is typical for investment banks. We show how decreasing credit frictions increase volatility but decrease the number of bankruptcies. JEL classification: C63 - D53 - D84 |
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| Fachbereich(e)/-gebiet(e): | 01 Fachbereich Rechts- und Wirtschaftswissenschaften 01 Fachbereich Rechts- und Wirtschaftswissenschaften > Volkswirtschaftliche Fachgebiete 01 Fachbereich Rechts- und Wirtschaftswissenschaften > Volkswirtschaftliche Fachgebiete > Fachgebiet Makroökonomie und Finanzmärkte |
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| Hinterlegungsdatum: | 20 Jul 2012 15:41 | ||||
| Letzte Änderung: | 29 Mai 2016 21:18 | ||||
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