We build an agent-based model with a threefold financial accelerator: (i) leverage—negative shocks on firms' output make banks less willing to loan funds and firms less willing to invest, and hence a credit reduction follows further reducing the output; (ii) stock market—due to lower profit, firms' capitalization on the stock market decreases, thus the distance-to-default diminishes and it reinforces the leverage accelerator; (iii) network—credit network may propagate the initial shock. We find that stock market volatility may damage the real economy if the stock market is too relevant. Our findings have relevant implications for monetary policy.

Stock market dynamics, leveraged network-based financial accelerator and monetary policy

RICCETTI, LUCA;
2016-01-01

Abstract

We build an agent-based model with a threefold financial accelerator: (i) leverage—negative shocks on firms' output make banks less willing to loan funds and firms less willing to invest, and hence a credit reduction follows further reducing the output; (ii) stock market—due to lower profit, firms' capitalization on the stock market decreases, thus the distance-to-default diminishes and it reinforces the leverage accelerator; (iii) network—credit network may propagate the initial shock. We find that stock market volatility may damage the real economy if the stock market is too relevant. Our findings have relevant implications for monetary policy.
2016
Elsevier Inc.
Internazionale
http://www.elsevier.com/locate/iref
File in questo prodotto:
File Dimensione Formato  
finalIREF.pdf

accesso aperto

Tipologia: Documento in post-print (versione successiva alla peer review e accettata per la pubblicazione)
Licenza: DRM non definito
Dimensione 609.15 kB
Formato Adobe PDF
609.15 kB Adobe PDF Visualizza/Apri
Riccetti_StockMarketDynamics_2016.pdf

solo utenti autorizzati

Tipologia: Versione editoriale (versione pubblicata con il layout dell'editore)
Licenza: DRM non definito
Dimensione 1.11 MB
Formato Adobe PDF
1.11 MB Adobe PDF   Visualizza/Apri   Richiedi una copia

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11393/235412
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 17
  • ???jsp.display-item.citation.isi??? 15
social impact