SPIROS BOUGHEAS spiros.bougheas@nottingham.ac.uk
Professor of Economics
Systemic risk and macroeconomic fat tails
Bougheas, Spiros; Harvey, David; Kirman, Alan
Authors
DAVID HARVEY dave.harvey@nottingham.ac.uk
Professor of Econometrics
Alan Kirman
Contributors
Pasquale Commendatore
Editor
Ingrid Kubin
Editor
SPIROS BOUGHEAS spiros.bougheas@nottingham.ac.uk
Editor
Alan Kirman
Editor
Michael Kopel
Editor
Gian Italo Bischi
Editor
Abstract
We propose a mechanism for shock amplification that potentially can account for fat tails in the distribution of the growth rate of national output. We argue that extreme macroeconomic events, such as the Great Depression and the Great Recession, were preceded by significant turmoil in the banking system. We have developed a model of bank network formation and presented numerical simulations that show that, for the benchmark case, aggregate credit follows a random walk. When we introduce fire sales the model does not only produce larger variations in the growth of aggregate credit but also shows that there is an asymmetry between booms and busts that is also consistent with empirical evidence.
Citation
Bougheas, S., Harvey, D., & Kirman, A. (2018). Systemic risk and macroeconomic fat tails. In P. Commendatore, I. Kubin, S. Bougheas, A. Kirman, M. Kopel, & G. I. Bischi (Eds.), The economy as a complex spatial system (119-136). Cham: Springer. https://doi.org/10.1007/978-3-319-65627-4_6
Acceptance Date | Jul 31, 2017 |
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Online Publication Date | Sep 19, 2017 |
Publication Date | Jan 1, 2018 |
Deposit Date | Sep 20, 2017 |
Publicly Available Date | Mar 29, 2024 |
Electronic ISSN | 2213-8684 |
Peer Reviewed | Peer Reviewed |
Pages | 119-136 |
Series Title | Springer proceedings in complexity |
Series ISSN | 2213-8692 |
Book Title | The economy as a complex spatial system |
ISBN | 978-3-319-65626-7 |
DOI | https://doi.org/10.1007/978-3-319-65627-4_6 |
Keywords | Systemic risk; Banking system; Aggregate risk; Financial network; Fat tails |
Public URL | https://nottingham-repository.worktribe.com/output/963716 |
Publisher URL | https://link.springer.com/chapter/10.1007/978-3-319-65627-4_6 |
Related Public URLs | http://www.springer.com/gb/book/9783319656267?wt_mc=ThirdParty.SpringerLink.3.EPR653.About_eBook |
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Copyright Statement
Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by/4.0
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