Exploring Agent-Based Methods for the Analysis of Payment Systems: A Crisis Model for StarLogo TNG
AbstractThis paper presents an exploratory agent-based model of a real time gross settlement (RTGS) payment system. Banks are represented as agents who exchange payment requests, which are then settled according to a set of simple rules. The model features the main elements of a real-life system, including a central bank acting as liquidity provider, and a simplified money market. A simulation exercise using synthetic data of BI-REL (the Italian RTGS) predicts the macroscopic impact of a disruptive event on the flow of interbank payments. In our reduced-scale system, three hypothetical distinct phases emerge after the disruptive event: 1) a liquidity sink effect is generated and the participants\' liquidity expectations turn out to be excessive; 2) an illusory thickening of the money market follows, along with increased payment delays; and, finally 3) defaulted obligations dramatically rise. The banks cannot staunch the losses accruing on defaults, even after they become fully aware of the critical event, and a scenario emerges in which it might be necessary for the central bank to step in as liquidity provider.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Journal of Artificial Societies and Social Simulation in its journal Journal of Artificial Societies and Social Simulation.
Volume (Year): 12 (2009)
Issue (Month): 1 ()
Contact details of provider:
Agent-Based Modeling; Payment Systems; RTGS; Liquidity; Crisis Simulation;
Other versions of this item:
- Luca Arciero & Claudia Biancotti & Leandro DÂ’Aurizio & Claudio Impenna, 2008. "Exploring agent-based methods for the analysis of payment systems: a crisis model for StarLogo TNG," Temi di discussione (Economic working papers) 686, Bank of Italy, Economic Research and International Relations Area.
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kimmo Soramaki & Morten L. Bech & Jeffrey Arnold & Robert J. Glass & Walter Beyeler, 2006.
"The topology of interbank payment flows,"
243, Federal Reserve Bank of New York.
- Soramäki, Kimmo & Bech, Morten L. & Arnold, Jeffrey & Glass, Robert J. & Beyeler, Walter E., 2007. "The topology of interbank payment flows," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 379(1), pages 317-333.
- Bech, Morten L. & Garratt, Rod, 2003.
"The intraday liquidity management game,"
Journal of Economic Theory,
Elsevier, vol. 109(2), pages 198-219, April.
- Bech, Morten L. & Garratt, Rod, 2001. "The Intraday Liquidity Management Game," University of California at Santa Barbara, Economics Working Paper Series qt0m6035wg, Department of Economics, UC Santa Barbara.
- Michael Boss & Helmut Elsinger & Martin Summer & Stefan Thurner, 2004. "Network topology of the interbank market," Quantitative Finance, Taylor & Francis Journals, vol. 4(6), pages 677-684.
- Nigel Gilbert & Pietro Terna, 2000. "How to build and use agent-based models in social science," Mind and Society: Cognitive Studies in Economics and Social Sciences, Fondazione Rosselli, vol. 1(1), pages 57-72, March.
- Jing Yang & Sheri Markose & Amadeo Alentorn, 2005.
"Designing large value payment systems: an agent based approach,"
Computing in Economics and Finance 2005
396, Society for Computational Economics.
- Sheri Markose & Amadeo Alentorn & Stephen Millard & Jing Yang, 2011. "Designing large value payment systems: An agent-based approach," Economics Discussion Papers 700, University of Essex, Department of Economics.
- James J. McAndrews & Simon M. Potter, 2002. "Liquidity effects of the events of September 11, 2001," Economic Policy Review, Federal Reserve Bank of New York, issue Nov, pages 59-79.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nigel Gilbert).
If references are entirely missing, you can add them using this form.