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Bifurcations and complex dynamics in a banking duopoly model with macroprudential policy

Author

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  • Ansori, Moch. Fandi
  • Brianzoni, Serena
  • Campisi, Giovanni

Abstract

We consider a banking duopoly model with a macroprudential policy in Indonesia called loan-to-deposit ratio-based reserve requirement (LDR-RR). The objective of the policy is to control the banking loans growth using a LDR-based penalty scheme that requires banks to save more money in the central bank to maintain their liquidity ratio. Following recent studies on banking models, we analyze a piecewise discrete-time model with two banks. We assume that the dynamics of the deposits follows the discrete logistic growth. Moreover, our model has two borders, hence we examine the resulting border-collision bifurcations. From the local stability analysis we find that, according to the parameter values, only the border-collision bifurcation or the flip bifurcation occurs. Finally, we perform several numerical simulations to confirm the stability analysis’ results. Our discrete dynamical system offers various possibilities of development for future research perspectives.

Suggested Citation

  • Ansori, Moch. Fandi & Brianzoni, Serena & Campisi, Giovanni, 2024. "Bifurcations and complex dynamics in a banking duopoly model with macroprudential policy," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 641(C).
    • Handle: RePEc:eee:phsmap:v:641:y:2024:i:c:s0378437124002395
    DOI: 10.1016/j.physa.2024.129730
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    References listed on IDEAS

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    1. Claessens, Stijn & Ghosh, Swati R. & Mihet, Roxana, 2013. "Macro-prudential policies to mitigate financial system vulnerabilities," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 153-185.
    2. Bacchiocchi, Andrea & Bischi, Gian Italo & Giombini, Germana, 2022. "Non-performing loans, expectations and banking stability: A dynamic model," Chaos, Solitons & Fractals, Elsevier, vol. 157(C).
    3. Fabio Tramontana & Laura Gardini & Frank Westerhoff, 2011. "Heterogeneous Speculators and Asset Price Dynamics: Further Results from a One-Dimensional Discontinuous Piecewise-Linear Map," Computational Economics, Springer;Society for Computational Economics, vol. 38(3), pages 329-347, October.
    4. Satria & Harun & Taruna, 2016. "The Macro-prudential aspects of loan-to-deposit-ratio-linked reserve requirement," Applied Economics, Taylor & Francis Journals, vol. 48(1), pages 24-34, January.
    5. Fanti, Luciano, 2014. "The dynamics of a banking duopoly with capital regulations," Economic Modelling, Elsevier, vol. 37(C), pages 340-349.
    6. Belkhir, Mohamed & Naceur, Sami Ben & Candelon, Bertrand & Wijnandts, Jean-Charles, 2022. "Macroprudential policies, economic growth and banking crises," Emerging Markets Review, Elsevier, vol. 53(C).
    7. Brianzoni, Serena & Campisi, Giovanni & Colasante, Annarita, 2022. "Nonlinear banking duopoly model with capital regulation: The case of Italy," Chaos, Solitons & Fractals, Elsevier, vol. 160(C).
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