Journal Cover Journal of Economic Interaction and Coordination
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   Hybrid Journal Hybrid journal (It can contain Open Access articles)
   ISSN (Print) 1860-7128 - ISSN (Online) 1860-711X
   Published by Springer-Verlag Homepage  [2350 journals]
  • Recent advances in financial networks and agent-based model validation
    • Authors: Mauro Napoletano; Eric Guerci; Nobuyuki Hanaki
      Pages: 1 - 7
      Abstract: We introduce the papers appearing in the special issue of this journal associated with the WEHIA 2015. The papers in issue deal with two growing fields in the in the literature inspired by the complexity-based approach to economic analysis. The first group of contributions develops network models of financial systems and show how these models can shed light on relevant issues that emerged in the aftermath of the last financial crisis. The second group of contributions deals with the issue of validation of agent-based model. Agent-based models have proven extremely useful to account for key features economic dynamics that are usually neglected by more standard models. At the same time, agent-based models have been criticized for the lack of an adequate validation against empirical data. The works in this issue propose useful techniques to validate agent-based models, thus contributing to the wider diffusion of these models in the economic discipline.
      PubDate: 2018-04-01
      DOI: 10.1007/s11403-018-0221-z
      Issue No: Vol. 13, No. 1 (2018)
  • Early warning indicators and macro-prudential policies: a credit network
           agent based model
    • Authors: Ermanno Catullo; Antonio Palestrini; Ruggero Grilli; Mauro Gallegati
      Pages: 81 - 115
      Abstract: Credit network configurations play a crucial role in determining the vulnerability of the economic system. Following the network-based financial accelerator approach, we constructed an agent based model reproducing an artificial credit network that evolves endogenously according to the leverage choices of heterogeneous firms and banks. Thus, our work aims at defining both early warning indicators for crises and policy precautionary measures based on the endogenous credit network dynamics. The model is calibrated on a sample of firms and banks quoted in the Japanese stock-exchange markets from 1980 to 2012. Both empirical and simulated data suggest that credit and connectivity variations could be used as early warning measures for crises. Moreover, targeting banks that are central in the credit network in terms of size and connectivity, the capital-related macro-prudential policies may reduce systemic vulnerability without affecting aggregate output.
      PubDate: 2018-04-01
      DOI: 10.1007/s11403-017-0199-y
      Issue No: Vol. 13, No. 1 (2018)
  • Structural comparisons of networks and model-based detection of
    • Authors: Gian Paolo Clemente; Marco Fattore; Rosanna Grassi
      Pages: 117 - 141
      Abstract: In this paper, we consider the problem of assessing the “level of small-worldness” of a graph and of detecting small-worldness features in real networks. After discussing the limitations of classical approaches, based on the computation of network indicators, we propose a new procedure, which involves the comparison of network structures at different “observation scales”. This allows small-world features to be caught, even if “hidden” deeply into the network structure. Applications of the procedure to both simulated and real data show the effectiveness of the proposal, also in distinguishing between different small-world models and in detecting emerging small-worldness in dynamical networks.
      PubDate: 2018-04-01
      DOI: 10.1007/s11403-017-0202-7
      Issue No: Vol. 13, No. 1 (2018)
  • On the robustness of the fat-tailed distribution of firm growth rates: a
           global sensitivity analysis
    • Authors: G. Dosi; M. C. Pereira; M. E. Virgillito
      Pages: 173 - 193
      Abstract: Firms grow and decline by relatively lumpy jumps which cannot be accounted by the cumulation of small, “atom-less”, independent shocks. Rather “big” episodes of expansion and contraction are relatively frequent. More technically, this is revealed by the fat-tailed distributions of growth rates. This applies across different levels of sectoral disaggregation, across countries, over different historical periods for which there are available data. What determines such property' In Dosi et al. (The footprint of evolutionary processes of learning and selection upon the statistical properties of industrial dynamics. Industrial and corporate change. Oxford University Press, Oxford, 2016) we implemented a simple multi-firm evolutionary simulation model, built upon the coupling of a replicator dynamic and an idiosyncratic learning process, which turns out to be able to robustly reproduce such a stylized fact. Here, we investigate, by means of a Kriging meta-model, how robust such “ubiquitousness” feature is with regard to a global exploration of the parameters space. The exercise confirms the high level of generality of the results in a statistically robust global sensitivity analysis framework.
      PubDate: 2018-04-01
      DOI: 10.1007/s11403-017-0193-4
      Issue No: Vol. 13, No. 1 (2018)
  • Realistic simulation of financial markets: analyzing market behaviors by
           the third mode of science
    • Authors: Damien Challet
      Pages: 195 - 196
      PubDate: 2018-04-01
      DOI: 10.1007/s11403-017-0197-0
      Issue No: Vol. 13, No. 1 (2018)
  • Correction to: Heterogeneity in social values and capital accumulation in
           a changing world
    • Authors: Pierre Gosselin; Aïleen Lotz; Marc Wambst
      Abstract: In the printed version of the article, the conditions for the derivatives of Eq. (5) in Sect. 3.2 contained several misprints. The correct version reads as follows.
      PubDate: 2018-04-21
      DOI: 10.1007/s11403-018-0222-y
  • Heterogeneity in social values and capital accumulation in a changing
    • Authors: Pierre Gosselin; Aïleen Lotz; Marc Wambst
      Abstract: In a society characterized by a multitude of heterogeneous agents and a large number of possibly immaterial goods, each one having distinct social and personal values, we study the impact of these relative values on intergenerational capital accumulation, as a function of economic and social parameters such as capital mobility, productivity and personal and social values discrepancies. Each agent is modelled by a one-period production function and a two-period intertemporal utility. Agents live, produce and consume over one period, but optimize over two periods, so providing a remaining stock of goods for the next generation. This creates a dynamics in capital accumulation depending on social and individual values. A threshold appears in capital stock accumulation that depends on personal and social values’ volatilities, and below which the initial stock will be depleted. Whereas volatility in social values increases the threshold, impairing capital accumulation, adverse shocks in goods’ values may reverse the dynamics of the accumulation process. Finally, capital mobility specifically favors forerunners, but capital accumulation in one or several sectors may shift social values in their direction, at the expense of other sectors.
      PubDate: 2018-03-21
      DOI: 10.1007/s11403-018-0220-0
  • Prospect Theory in the Heterogeneous Agent Model
    • Authors: Jan Polach; Jiri Kukacka
      Abstract: Using the Heterogeneous Agent Model framework, we incorporate an extension based on Prospect Theory into a popular agent-based asset pricing model. This extension covers the phenomenon of loss aversion manifested in risk aversion and asymmetric treatment of gains and losses. Using Monte Carlo methods, we investigate behavior and statistical properties of the extended model and assess how our extension is manifested in different strategies. We show that, on the one hand, the Prospect Theory extension keeps the essential underlying mechanics of the model intact, but on the other hand it considerably changes the model dynamics. Stability of the model is increased and fundamentalists may be able to survive in the market more easily. When only the fundamentalists are loss-averse, other strategies profit more.
      PubDate: 2018-03-17
      DOI: 10.1007/s11403-018-0219-6
  • Learning to save in a voluntary pension system: toward an agent-based
    • Authors: Balázs Király; András Simonovits
      Abstract: Mandatory pension systems partially replace old-age income, therefore the government matches additional life-cycle savings in a voluntary pension system. Though the individual saving decisions are apparently independent, the earmarked taxes (paid to finance the matching) connect them. Previous models either neglected the endogenous tax expenditures (e.g. Choi et al., in: Wise (ed) Perspectives in the economics of aging, University of Chicago Press, Chicago, pp 81–121, 2004) or assumed very sophisticated saving strategies (e.g. Fehr et al. in FinanzArchiv Pub Finance Anal 64:171–198, 2008). We create twin models: myopic workers learn (i) from farsighted workers using public information (analytic model) and (ii) also from each other (agent-based model). These models provide more realistic results on saving behavior and the impact of matching on the income redistribution than the earlier models.
      PubDate: 2018-03-14
      DOI: 10.1007/s11403-018-0218-7
  • Network calibration and metamodeling of a financial accelerator agent
           based model
    • Authors: Leonardo Bargigli; Luca Riccetti; Alberto Russo; Mauro Gallegati
      Abstract: We introduce a simple financially constrained production framework in which heterogeneous firms and banks maintain multiple credit connections. The parameters of credit market interaction are estimated from real data in order to reproduce a set of empirical regularities of the Japanese credit market. We then pursue the metamodeling approach, i.e. we derive a reduced form for a set of simulated moments \(h(\theta ,s)\) through the following steps: (1) we run agent-based simulations using an efficient sampling design of the parameter space \(\Theta \) ; (2) we employ the simulated data to estimate and then compare a number of alternative statistical metamodels. Then, using the best fitting metamodels, we study through sensitivity analysis the effects on h of variations in the components of \(\theta \in \Theta \) . Finally, we employ the same approach to calibrate our agent-based model (ABM) with Japanese data. Notwithstanding the fact that our simple model is rejected by the evidence, we show th at metamodels can provide a methodologically robust answer to the question “does the ABM replicate empirical data'”.
      PubDate: 2018-03-13
      DOI: 10.1007/s11403-018-0217-8
  • Understanding the consequences of diversification on financial stability
    • Authors: Opeoluwa Banwo; Paul Harrald; Francesca Medda
      Abstract: In this paper, we study the consequences of diversification on financial stability and social welfare using an agent based model that couples the real economy and a financial system. We validate the model against its ability to reproduce several stylized facts reported in real economies. We find that the risk of an isolated bank failure (i.e. idiosyncratic risk) is decreasing with diversification. In contrast, the probability of joint failures (i.e. systemic risk) is increasing with diversification which results in more downturns in the real sector. Additionally, we find that the system displays a “robust yet fragile” behaviour particularly for low diversification. Moreover, we study the impact of introducing preferential attachment into the lending relationships between banks and firms. Finally, we show that a regulatory policy that promotes bank–firm credit transactions that reduce similarity between banks can improve financial stability whilst permitting diversification.
      PubDate: 2018-03-06
      DOI: 10.1007/s11403-018-0216-9
  • Are the stock and real estate markets integrated in China'
    • Authors: Chi-Wei Su; Xiao-Cui Yin; Hsu-Ling Chang; Hai-Gang Zhou
      Abstract: This paper examines the dynamic short-run and long-run co-movement between the real estate and stock markets in China by employing a continuous wavelet method. We use gross domestic product and M2 (broad money supply) as control variables to eliminate the common factors of the two markets and to identify the real nexus between them. The empirical results show that the co-movement between real estate and stock prices is weak in the short run, except during the financial crisis period. Since the stock market is highly volatile, while real estate prices are relatively stable, the two markets are less correlated in the short run. The results also show that real estate prices affect stock prices in the long run, which supports the existence of a credit-price effect in China. Real estate prices remained very high in most time periods. Enterprises and individuals can obtain funds from bank loans to invest in the stock market, thus raising stock prices. These findings indicate that the two markets are generally segmented in the short run but are integrated in the long run. The stabilization of the real estate market is critical for stability in the stock market, but not vice versa. Additionally, investments in the two markets may not provide a high level of risk dispersion in the long run in China.
      PubDate: 2018-03-06
      DOI: 10.1007/s11403-018-0215-x
  • Efficient coordination in the lab
    • Authors: Aurora García-Gallego; Penélope Hernández-Rojas; Amalia Rodrigo-González
      Abstract: We follow the example of Gossner et al. (Econometrica 74(6):1603–1636, 2006) in the design of a finitely repeated 2-player coordination game with asymmetric information. Player 1 and Player 2 and Nature simultaneously decide whether to play 0 or 1 and successful coordination requires that all actions coincide. Nature’s moves are known only by Player 1, while Player 2 observes only the history of Nature and Player 1. In such a theoretical set up, efficient transmission of information takes place when Player 1 uses block codification through signalling mistakes. With this in mind, we test coordination in the lab. We first model and establish the appropriate sequence length played by Nature and the block strategy for lab implementability. We show that the majority rule with 3-length is the optimal block codification for a 55-length sequence. Experimental data supports the main results of the original model with respect to the codification rule using signalling mistakes.
      PubDate: 2017-12-28
      DOI: 10.1007/s11403-017-0214-3
  • Exponential structure of income inequality: evidence from 67 countries
    • Authors: Yong Tao; Xiangjun Wu; Tao Zhou; Weibo Yan; Yanyuxiang Huang; Han Yu; Benedict Mondal; Victor M. Yakovenko
      Abstract: Economic competition between humans leads to income inequality, but, so far, there has been little understanding of underlying quantitative mechanisms governing such a collective behavior. We analyze datasets of household income from 67 countries, ranging from Europe to Latin America, North America and Asia. For all of the countries, we find a surprisingly uniform rule: income distribution for the great majority of populations (low and middle income classes) follows an exponential law. To explain this empirical observation, we propose a theoretical model within the standard framework of modern economics and show that free competition and Rawls’ fairness are the underlying mechanisms producing the exponential pattern. The free parameters of the exponential distribution in our model have an explicit economic interpretation and direct relevance to policy measures intended to alleviate income inequality.
      PubDate: 2017-12-27
      DOI: 10.1007/s11403-017-0211-6
  • Economics with heterogeneous interacting agents: a practical guide to
           agent-based modeling, Edited by Alessandro Caiani, Alberto Russo, Antonio
           Palestrini, Mauro Gallegati
    • Authors: Wei-Bin Zhang
      PubDate: 2017-12-21
      DOI: 10.1007/s11403-017-0213-4
  • Stagnation proofness in n -agent bargaining problems
    • Authors: Jaume García-Segarra; Miguel Ginés-Vilar
      Abstract: Some bargaining solutions may remain unchanged under any extension of a bargaining set which does not affect the utopia point, despite the fact that there is room to improve the utility of at least one agent. We call this phenomenon the stagnation effect. A bargaining solution satisfies stagnation proofness if it does not suffer from the stagnation effect. We show that stagnation proofness is compatible with the restricted version of strong monotonicity (Thomson and Myerson in Int J Game Theory 9(1):37–49, 1980), weak Pareto optimality, and scale invariance. The four axioms together characterize the family of the bargaining solutions generated by strictly-increasing paths ending at the utopia point (SIPUP-solutions).
      PubDate: 2017-12-20
      DOI: 10.1007/s11403-017-0212-5
  • Combining monetary policy and prudential regulation: an agent-based
           modeling approach
    • Authors: Michel Alexandre; Gilberto Tadeu Lima
      Abstract: This paper explores the interaction between monetary policy and prudential regulation in an agent-based modeling framework. Firms borrow funds from the banking system in an economy regulated by a central bank. The central bank carries out monetary policy, by setting the interest rate, and prudential regulation, by establishing the banking capital requirement. Different combinations of interest rate rule and capital requirement rule are evaluated with respect to both macroeconomic and financial stability. Several relevant policy implications were drawn. First, the efficacy of a given capital requirement rule or interest rate rule depends on the specification of the rule of the other type it is combined with. More precisely, less aggressive interest rate rules perform better when the range of variation of the capital requirement is narrower. Second, interest rate smoothing is more effective than the other interest rate rules assessed, as it outperforms those other rules with respect to financial stability and macroeconomic stability. Third, there is no tradeoff between financial and macroeconomic stability associated with a variation of either the capital requirement or the smoothing interest rate parameter. Finally, our results reinforce the cautionary finding of other studies regarding how output can be ravaged by a low inflation targeting.
      PubDate: 2017-12-11
      DOI: 10.1007/s11403-017-0209-0
  • A functional perspective on financial networks
    • Authors: Edoardo Gaffeo; Massimo Molinari
      Abstract: The financial sector is a critical component of any economic system, as it delivers key qualitative asset transformation services in terms of liquidity, maturity and volume. Although these functions could in principle be carried out separately by specialized actors, in the end it is their systemic co-evolution that determines how the aggregate economy performs and withstands disruptions. In this paper we argue that a functional perspective on financial intermediation can be usefully employed to investigate the functioning of financial networks. We do this in two steps. First, we use previously unreleased data to show that focusing on the economic functions performed over time by the different institutions exchanging funds in an interbank market can be informative, even if the underlying topological structure of their relations remains constant. Second, a set of alternative artificial histories are generated and stress-tested by using real data as a calibration base, with the aim of performing counterfactual welfare comparisons among different topological structures.
      PubDate: 2017-12-02
      DOI: 10.1007/s11403-017-0210-7
  • Empirical validation of simulated models through the GSL-div: an
           illustrative application
    • Authors: Francesco Lamperti
      Abstract: A major concern about the use of simulation models regards their relationship with the empirical data. The identification of a suitable indicator quantifying the distance between the model and the data would help and guide model selection and output validation. This paper proposes the use of a new criterion, called GSL-div and developed in Lamperti (Econ Stat, 2017., to assess the degree of similarity between the dynamics observed in the data and those generated by the numerical simulation of models. As an illustrative application, this approach is used to distinguish between different versions of the well known asset pricing model with heterogeneous beliefs proposed in Brock and Hommes (J Econ Dyn Control 22(8–9):1235–1274, 1998. Once the discrimination ability of the GSL-div is proved, model’s dynamics are directly compared with actual data coming from two major stock market indexes (EuroSTOXX 50 for Europe and CSI 300 for China). Results show that the model, once calibrated, is fairly able to track the evolution of both the two indexes, even though a better fit is reported for the Chinese stock market. However, I also find that many different combinations of traders’ behavioural rules are compatible with the same observed dynamics. Within this heterogeneity, an emerging common trait is found: to be empirically valid, the model has to account for a strong trend following component, which might either come from a unique trend type that heavily extrapolates information from past observations or the combinations of different types with milder, or even opposite, attitudes towards the trend.
      PubDate: 2017-11-20
      DOI: 10.1007/s11403-017-0206-3
  • Does a central clearing counterparty reduce liquidity needs'
    • Authors: Hitoshi Hayakawa
      Abstract: This study investigates whether and how central clearing influences the overall liquidity needs in a network of financial obligations. Utilizing the approach of flow network theory, we show that the effect of adding a central clearing counterparty (CCP) is decomposed into two effects: central routing, and central netting effects. Each effect can produce different liquidity needs according to different liquidity scenarios. The analysis indicates that adding a CCP in times of financial distress successfully reduces the overall liquidity needs if and only if the netting efficiency of the CCP is sufficiently high. Furthermore, once the economy is no longer in financial distress, higher netting efficiency of the CCP could conversely increase the overall liquidity needs. The results have implications for the effectiveness of CCPs in mitigating systemic risk in times of financial distress, and their operating costs once the distress has passed.
      PubDate: 2017-11-16
      DOI: 10.1007/s11403-017-0208-1
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