... give me a one-handed economist. All my economists say 'on one hand ...', then 'but on the other one ...' (H. Truman)
Matching frictions, credit reallocation and macroeconomic activity: how harmful are financial crises?
(with Emanuele Ciola and Mauro Gallegati)
This paper develops a macroeconomic model of real-financial market
interactions in which the credit and the business cycles reinforce each other according
to a bidirectional causal relationship. We do so in the context of a
computational agent-based framework, where the channelling of funds from savers to
investors occurring through intermediaries is affected by information frictions.
Since banks compete in both the deposit and the loan markets, the whole dynamics
is driven by endogenous fluctuations in the size of the intermediaries’ balance
sheet. We use the model to show that financial crisis are particularly harmful when
hitting in phase with a real recession, and that when this occurs the loss in
real output is permanent.
Bilateral netting and systemic liquidity shortages in banking networks
(with Lucio Gobbi and Massimo Molinari)
cross holding of interbank deposits represents an optimal ex-ante
risk-sharing arrangement whenever the uncertainty concerning banks’
liquidity needs is idiosyncratic and imperfectly correlated. When a shock to aggregate liquidity
demand occurs, however, such an arrangement could be detrimental –
depending on the topological structure of interlinkages - as financial
exposures become a means to spread risk. If the ex-post facto
is an excess demand for liquidity, therefore, regulators could sever
potential channels of
contagion by forcing banks to net their mutual debt obligations.
Starting from these premises we employ simulation techniques with
structures to obtain two results. First, a contingent-based mandatory
policy to bilaterally net mutual interbank exposures comes with a
trade-off between the benefits of thwarting the channels of contagion
and the harms of a greater concentration of the remaining netted
expositions. Second, the weigh between the two prongs of the trade-off
depends on the metric used by regulators to define financial stability
and the topological structure characterizing the interbank market.
Leverage and evolving heterogeneous beliefs in a simple agent-based financial market
research has acknowledged the crucial role of financial intermediaries'
balance sheet variables - namely, wealth and leverage - in the dynamics
of asset prices. In this paper we use a prototypical "small-type"
artificial financial market model with heterogeneous interacting
traders to pin down how asset prices are affected by the complex
interaction between balance sheet contraints and the endogenous
evolution of trading rules.
- Prediction markets and the social economy (with Luigi Mittone, Matteo Ploner and Alessandro Rossi)
- Are loans and debt securities complements or substitutes? A time-frequency analysis for the US (with Marco Gallegati)
- The pro-cyclicality of real wages: evidence from the XIXth century art market (with Antonello Scorcu)
teaching other activities
food for thought