Agent-Based Simulation of Financial Institution Investment Strategy Under Easing Monetary Policy for Operative Collapses

Authored by Takamasa Kikuchi, Masaaki Kunigami, Takashi Yamada, Hiroshi Takahashi, Takao Terano

Date Published: 2018

DOI: 10.20965/jaciii.2018.p1026

Sponsors: No sponsors listed

Platforms: No platforms listed

Model Documentation: Other Narrative Flow charts Mathematical description

Model Code URLs: Model code not found

Abstract

Europe and Japan have both adopted negative interest rate policies as part of their monetary easing measures. However, despite the benefits that are claimed to be associated with increased lending demand, significant concerns exist regarding an increased burden on private financial institutions as a result of the application to their excess reserves. In this paper, we focus on the risks associated with increased investment of surplus funds for the operation of financial institutions. We propose an agent-based model for interlocking specific bankruptcy based on changes in financial situations as a result of market price fluctuations involving assets held by financial institutions. To extend the proposed model to handle macro market shocks, we describe decision making regarding funds that are surplus to the operation of financial institutions. Additionally, we analyze the impact of price declines involving marketable assets on financial systems.

Tags

Agent-based model Liquidity Systemic risk Contagion Negative interest rate policy Asset liability management