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Financial Fragility in a General Equilibrium Model: the Brazilian case

  • Benjamin M. Tabak
  • Daniel O. Cajueiro
  • Dimas M. Fazio

This paper employs a general equilibrium approach to model the Brazilian financial system. We show that the model is able to replicate the main characteristics of the data and to predict short-term trends. The model is calibrated for the 2002-2006 period. Empirical results suggest that the financial system is improving in terms of financial stability over time. Furthermore, the model has been proven useful to model the Brazilian banking system and could be employed to evaluate the impact of changes in financial regulation on the banking system.

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File URL: http://www.bcb.gov.br/pec/wps/ingl/wps229.pdf
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Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 229.

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Date of creation: Dec 2010
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Handle: RePEc:bcb:wpaper:229
Contact details of provider: Web page: http://www.bcb.gov.br/?english

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  1. Hoggarth, Glenn & Reis, Ricardo & Saporta, Victoria, 2002. "Costs of banking system instability: Some empirical evidence," Journal of Banking & Finance, Elsevier, vol. 26(5), pages 825-855, May.
  2. Dimitrios Tsomocos & Sudipto Bhattacharya & Charles Goodhart & Pojanart Sunirand, 2007. "Banks, relative performance, and sequential contagion," Economic Theory, Springer, vol. 32(2), pages 381-398, August.
  3. Charles A.E. Goodhart & Pojanart Sunirand & Dimitrios P. Tsomocos, 2003. "A Model to Analyse Financial Fragility," OFRC Working Papers Series 2003fe13, Oxford Financial Research Centre.
  4. Tsomocos, Dimitrios P., 2003. "Equilibrium analysis, banking and financial instability," Journal of Mathematical Economics, Elsevier, vol. 39(5-6), pages 619-655, July.
  5. Dimitrios Tsomocos & Eva Catarineu-Rabell & Patricia Jackson, 2003. "Procyclicality and the new Basel Accord–banks’ choice of loan rating system," FMG Discussion Papers dp464, Financial Markets Group.
  6. C. Goodhart & M. Peiris & D. Tsomocos & A. Vardoulakis, 2010. "On dividend restrictions and the collapse of the interbank market," Annals of Finance, Springer, vol. 6(4), pages 455-473, October.
  7. Benjamin M. Tabak & Dimas M. Fazio & Daniel O. Cajueiro, 2010. "The Effects of Loan Portfolio Concentration on Brazilian Banks' Return and Risk," Working Papers Series 215, Central Bank of Brazil, Research Department.
  8. Agustín Saade & Daniel Osorio & Dairo Estrada, 2007. "An equilibrium approach to financial stability analysis: the Colombian case," Annals of Finance, Springer, vol. 3(1), pages 75-105, January.
  9. Xavier Freixas & Bruno Parigi & Jean Charles Rochet, 1998. "Systemic risk, interbank relations and liquidity provision by the Central Bank," Economics Working Papers 440, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 1999.
  10. Chang, E.J. & Guerra, S.M. & Lima, E.J.A. & Tabak, B.M., 2008. "The stability-concentration relationship in the Brazilian banking system," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(4), pages 388-397, October.
  11. Chiara Pederzoli & Costanza Torricelli & Dimitrios P. Tsomocos, 2008. "Rating systems, procyclicality and Basel II: an evaluation in a general equilibrium framework," OFRC Working Papers Series 2008fe27, Oxford Financial Research Centre.
  12. Baer, Werner & Nazmi, Nader, 2000. "Privatization and restructuring of banks in Brazil," The Quarterly Review of Economics and Finance, Elsevier, vol. 40(1), pages 3-24.
  13. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2006. "Bank concentration, competition, and crises: First results," Journal of Banking & Finance, Elsevier, vol. 30(5), pages 1581-1603, May.
  14. Wilko Bolt & Leo de Haan & Marco Hoeberichts & Maarten van Oordt & Job Swank, 2010. "Bank Profitability during Recessions," DNB Working Papers 251, Netherlands Central Bank, Research Department.
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