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Game-Theoretic Perspectives on Financial Crises

Author

Listed:
  • Welburn, Jonathan

    (U Wisconsin)

  • Hausken, Kjell

    (University of Stavanger)

Abstract

Global financial crises have revealed the systemic risk posed by economic contagion. We provide perspectives on the formulation of a game between countries, central banks, banks, firms, households, and financial intergovernmental organizations to model the dynamics between players. We model strategic choices, strategy sets, and utility functions to provide new tools to handle financial crises. The model is illustrated with examples using sensitivity analysis. One country, and two countries, are considered, and we simulate the impacts of random shocks under a variety of assumptions.

Suggested Citation

  • Welburn, Jonathan & Hausken, Kjell, 2014. "Game-Theoretic Perspectives on Financial Crises," UiS Working Papers in Economics and Finance 2014/22, University of Stavanger.
    • Handle: RePEc:hhs:stavef:2014_022
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Contagion; financial risk; game theory; bank; central bank; country; firms; households; intergovernmental organization; consumption; production; capital; default; borrow; lend; financial friction; shock; sensitivity analysis;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General

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