A Time Series Analysis of Financial Fragility in the UK Banking System
- 476 Downloads
This paper extends the model proposed by Goodhart, Sunirand, and Tsomocos (2004, 2005, 2006) to an infinite horizon setting. Thus, we are able to assess how the model conforms with the time series data of the UK banking system. We conclude that, since the model performs satisfactorily, it can be readily used to assess financial fragility given its flexibility, computability, and the presence of multiple contagion channels and heterogeneous banks and investors.
Keywords and PhrasesFinancial fragility Systemic risk UK banking system Default
Unable to display preview. Download preview PDF.
- Bhattacharya S., Goodhart C.A.E., Sunirand P., Tsomocos D.P. (2003). Relative performance, banks and sequential contagion. University of Oxford, MimeoGoogle Scholar
- Elsinger, H., Lehar, A., Summer, M.: Risk assessment for banking systems. Oesterreichische Nationalbank (Austrian National Bank) Working Paper no. 79 (2003)Google Scholar
- Goodhart C.A.E., Sunirand P., Tsomocos D.P. (2004). A model to analyse financial fragility: applications. J Financ Stab 1(1):1–30Google Scholar
- Goodhart C.A.E., Sunirand P., Tsomocos D.P. (2005). A risk assessment model for banks. Ann~Finance 1:197–224Google Scholar
- Shubik M. (1999). The theory of money and financial institutions. MIT Press, Cambridge, MAGoogle Scholar
- Shubik M., Tsomocos D.P. (1992). A strategic market game with a mutual bank with fractional reserves and redemption in gold. J Econ 55(2):123–150Google Scholar
- Shubik M., Wilson C. (1977). The optimal bankruptcy rule in a trading economy using fiat money. J Econ 37:337–354Google Scholar
- Tsomocos D.P. Equilibrium analysis, banking, contagion and financial fragility. Greek Econ Rev 23(1) (2003b)Google Scholar
- Tsomocos D.P., Zicchino L. (2004). On modelling endogenous default. Bank of England, MimeoGoogle Scholar