Leverage regulation: An agent-based simulation
AbstractAn agent-based financial market model is used to simulate the effects of financial regulation to reduce financial leverage. Results suggest that regulating leverage using margin calls can lead to less frequent financial crises per century, however, it creates harder hit financial crises than without regulation. In addition, regulation where the central authority tries to prick bubbles also leads to less frequent financial crises, but, creates greater volatility. Lastly, I find that leverage regulation where agent's ability to borrow is not dependent on price produces less frequent crises and less volatility than the other regimes.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economics and Business.
Volume (Year): 63 (2011)
Issue (Month): 5 (September)
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Web page: http://www.elsevier.com/locate/jeconbus
Agent-based models Financial regulation Financial crises;
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