Macroprudential Policies in a Dynamical Model of the Basel Leverage Cycle

In the presentation 'Evaluating Macroprudential Policies in a Dynamical Model of the Basel Leverage Cycle' at the 10th Tinbergen Institute Conference 2015, Doyne Farmer (Oxford University), points out the need of improved risk control policy. According to Farmer, Basel-style risk control generates chaotic endogenous dynamics and price crashes when the leverage and size of a banking sector is high. To illustrate this he uses a simple ABM, which can be calibrated to real data.

J. Doyne Farmer is a External Professor at the Santa Fe Institute. He has broad interests in complex systems, and has done research in dynamical systems theory, time series analysis and theoretical biology. At present his main interest is in developing quantitative theories for social evolution, in particular for financial markets and the evolution of technologies.
The objective of the Tinbergen Institute Conference 2015 was (1) to introduce a broad economic public to the complex systems approach, in particular applied to macroeconomic and financial systems; and (2) to increase understanding and foster collaboration between the different sciences in the analysis of economics and finance.

Check out the presentation for more...