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Leveraged Network-Based Financial Accelerator

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  • Luca RICCETTI

    ()
    (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)

  • Alberto RUSSO

    ()
    (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)

  • Mauro GALLEGATI

    ()
    (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)

Abstract

In this paper we build on the network-based financial accelerator model of Delli Gatti et al. (2010), modelling the firms' financial structure following the "dynamic trade-off theory", instead of the "pecking order theory". Moreover, we allow for multiperiodal debt structure and consider multiple bank-firm links based on a myopic preferred-partner choice. In case of default, we also consider the loss given default rate (LGDR). We find many results: (i) if leverage increases, the economy is riskier; (ii) a higher leverage pro-cyclicality has a destabilizing effect; (iii) a pro-cyclical leverage weakens the monetary policy effect; (iv) a Central Bank that wants to increase the interest rate, should previously check if the banking system is well capitalized; (v) policy maker has to develop the laws about bankruptcies to reduce the LGDR and improve the stability of banks.

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Bibliographic Info

Paper provided by Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali in its series Working Papers with number 371.

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Length: 31
Date of creation: Dec 2011
Date of revision:
Handle: RePEc:anc:wpaper:371

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Keywords: Leverage; agent based model; bankruptcy cascades; dynamic trade-off theory; monetary policy;

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References

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  1. OSSERVATORIO PUD€ 3 - LA GRILLONOMICS: NOVITA' O ACCORDI IN VISTA COL PUD€?
    by Quarantotto in Orizzonte48 on 2013-02-28 07:54:00
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  2. Paolo Tasca & Stefano Battiston, . "Market Procyclicality and Systemic Risk," Working Papers ETH-RC-12-012, ETH Zurich, Chair of Systems Design.
  3. repec:spo:wpecon:info:hdl:2441/f6h8764enu2lskk9p6go0e900 is not listed on IDEAS
  4. Russo, Alberto, 2013. "Financial Fragility and Macroeconomic Instability in a Heterogeneous Interacting Agents Framework," MPRA Paper 46578, University Library of Munich, Germany.
  5. Riccetti, Luca & Russo, Alberto & Mauro, Gallegati, 2013. "Financial Regulation in an Agent Based Macroeconomic Model," MPRA Paper 51013, University Library of Munich, Germany.
  6. Alberto Russo, 2014. "A Stochastic Model of Wealth Accumulation with Class Division," Metroeconomica, Wiley Blackwell, vol. 65(1), pages 1-35, 02.
  7. Simone LENZU & Gabriele TEDESCHI, 2012. "Systemic risk on different interbank network topologies," Working Papers 375, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  8. Eralba CELA & Tineke FOKKEMA & Elena AMBROSETTI, 2012. "Links Between Transnationalism Integration and Duration of Residence: The Case of eastern European Migrants in Italy," Working Papers 386, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  9. Alessandro STERLACCHINI, 2012. "Patent Oppositions as Competitive Tools: An Analysis of the Major Players in the European Market of White Goods," Working Papers 374, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  10. Riccetti, Luca & Russo, Alberto & Gallegati, Mauro, 2013. "Unemployment benefits and financial factors in an agent-based macroeconomic model," Economics Discussion Papers 2013-9, Kiel Institute for the World Economy.
  11. Riccetti, Luca & Russo, Alberto & Gallegati, Mauro, 2013. "Financialisation and Crisis in an Agent Based Macroeconomomic Model," MPRA Paper 51074, University Library of Munich, Germany.
  12. Ricetti, Luca & Russo, Alberto & Gallegati, Mauro, 2013. "Unemployment benefits and financial leverage in an agent based macroeconomic model," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 7(42), pages 1-44.
  13. Riccetti, Luca & Russo, Alberto & Gallegati, Mauro, 2012. "An Agent Based Decentralized Matching Macroeconomic Model," MPRA Paper 42211, University Library of Munich, Germany.
  14. Russo, Alberto & Riccetti, Luca & Gallegati, Mauro, 2013. "Increasing Inequality and Financial Fragility in an An Agent Based Macroeconomic Model," MPRA Paper 51528, University Library of Munich, Germany.
  15. Ruggero GRILLI & Gabriele TEDESCHI & Mauro GALLEGATI, 2012. "Markets connectivity and financial contagion," Working Papers 382, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

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