Money creation and financial instability: An agent-based credit network approach

Artikel

The authors develop a simple agent-based and stock flow consistent model of a monetary economy. Their model is well suited to explain money creation along the lines of mainstream theory. Additionally it uncovers a potential instability that follows from a maturity mismatch of assets and liabilities. The authors analyze the impact of interbank lending on the stability of the financial sector and find that an interbank market stabilizes the economy during normal times but amplifies systemic instability, contagion and bankruptcy cascades during crises. But even with no interbank market, indirect contagion can lead to bankruptcy cascades. The authors also find that the existence of large banks threatens stability and that regulatory policy should target large banks more strictly than small.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Economics: The Open-Access, Open-Assessment E-Journal ; ISSN: 1864-6042 ; Volume: 7 ; Year: 2013 ; Issue: 2013-32 ; Pages: 1-44 ; Kiel: Kiel Institute for the World Economy (IfW)

Classification and Topics

• Classification: Wirtschaft ; Computational Techniques; Simulation Modeling ; Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems ; Money Supply; Credit; Money Multipliers ; Financial Crises
• Subject: financial instability ; agent-based macroeconomics ; stock-flow consistency ; disequilibrium analysis ; Basel II ; Finanzkrise ; Geldschöpfung ; Agentenbasierte Modellierung ; Neukeynesianische Makroökonomik ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lengnick, Matthias ; Krug, Sebastian ; Wohltmann, Hans-Werner
• Event: Veröffentlichung
• (who): Kiel Institute for the World Economy (IfW)
• (where): Kiel
• (when): 2013

Further information

• DOI: doi:10.5018/economics-ejournal.ja.2013-32
• Handle: http://hdl.handle.net/10419/78708
• Last update: 10.03.2025, 11:45 AM CET