IDEAS home Printed from https://ideas.repec.org/p/nan/wpaper/1309.html
   My bibliography  Save this paper

Propagation of Financial Crises: A Heterogenous Agents Approach

Author

Listed:
  • Weihong HUANG

    (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, Singapore, 637332.)

  • Zhenxi CHEN

    (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, Singapore, 637332.)

Abstract

We propose a two-market heterogeneous agents model with coupling mechanism to study Financial crisis with contagion effect. It manages to calibrate sudden crash behavior of US and UK stock markets during "Black Monday" of 1987 besides smooth crisis and disturbing crisis categorized in literature. It is implied that financial crisis and its contagion could be endogenous and supports scenario of over-valuation causing financial crisis. In addition, the model shows that financial system could be fragile in which small shock(s) hitting individual market's fundamental could cause financial crisis which spreads to other market. It also supports scenario of external shock triggering financial crisis. Lastly, the model manages to match typical stylized facts, especially cross-correlation which is exclusive to multi-market case.

Suggested Citation

  • Weihong HUANG & Zhenxi CHEN, 2013. "Propagation of Financial Crises: A Heterogenous Agents Approach," Economic Growth Centre Working Paper Series 1309, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    • Handle: RePEc:nan:wpaper:1309
    as

    Download full text from publisher

    File URL: http://www3.ntu.edu.sg/hss2/egc/wp/2013/2013-09.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Evolutionary biology; happiness; interpersonal comparison; measurability; wellbeing; welfare;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nan:wpaper:1309. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Magdalene Lim (email available below). General contact details of provider: https://edirc.repec.org/data/dentusg.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.