Financial and economic crises are not always the same. It is important to understand why some episodes of crisis generate prolonged and systemic recessions. Developing the Financial Instability Hypothesis, Hyman Minsky introduced the idea that in periods of stability, financial actors tend to increase their risk exposure, moving from a stable hedge-dominated structure to an unstable one, characterized by speculative and ultra-speculative (Ponzi) financial positions: hence, stability turns out being destabilizing. Starting from the three different relationships introduced by Minsky (income-debt-hedge, speculative and Ponzi) for financial units, we involve a simple partial equilibrium agent-based model in which firms, the banking sector, the real and financial sides of the economy, interact. This theoretic framework is used as computational laboratory to extend the migration rates open system modeling based on the E(ntry)-S(tay)-L(eave) processes by considering the economic system, the business cycle and with attention to so-called zombie-firms.

Financial fragility and credit risk: A simulation model

Cafferata, Alessia
Co-first
;
Landini, Simone
Co-first
;
Uberti, Mariacristina
Co-first
2023-01-01

Abstract

Financial and economic crises are not always the same. It is important to understand why some episodes of crisis generate prolonged and systemic recessions. Developing the Financial Instability Hypothesis, Hyman Minsky introduced the idea that in periods of stability, financial actors tend to increase their risk exposure, moving from a stable hedge-dominated structure to an unstable one, characterized by speculative and ultra-speculative (Ponzi) financial positions: hence, stability turns out being destabilizing. Starting from the three different relationships introduced by Minsky (income-debt-hedge, speculative and Ponzi) for financial units, we involve a simple partial equilibrium agent-based model in which firms, the banking sector, the real and financial sides of the economy, interact. This theoretic framework is used as computational laboratory to extend the migration rates open system modeling based on the E(ntry)-S(tay)-L(eave) processes by considering the economic system, the business cycle and with attention to so-called zombie-firms.
2023
116
1
14
https://www.sciencedirect.com/science/article/abs/pii/S1007570422003665
Credit risk, Financial instability, MinskyAgent-based model
Cafferata, Alessia; Casellina, Simone; Landini, Simone; Uberti, Mariacristina
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2318/1875284
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