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Lending attitude as a financial accelerator in a credit network economy

  • Daiki AsanumaEmail author
Regular Article
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Abstract

In existing literature, commercial banks are often considered mere financial intermediaries that facilitate the flow of credit in an imperfect credit market. However, as demonstrated in the history of financial instability, the behavior of financial institutions plays an important role. This paper examines how lenders’ attitudes affect macroeconomic performance. In our analysis, the economy is composed of multiple borrowers (firms) and one lender (bank). Each borrower is directly connected to the lender through its credit contract. At the same time, each borrower is indirectly connected to all the other borrowers within the credit network. Using this model, we execute computer simulations to examine the economic consequences of lending attitudes. The results of the simulations demonstrate that the bank’s lending attitude functions as a financial accelerator; that is, it significantly affects the dynamics of the economic system through the credit network. Consequently, the same level of exogenous shock generates completely different outcomes depending on the different lending attitudes. The results also show that there exists an optimal lending attitude that leads to high economic growth and a stable growth path.

Keywords

Agent-based model Credit network economy Bank’s lending attitudes Financial accelerator Optimal lending attitude 

JEL Classification

E51 G21 

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Copyright information

© Springer-Verlag 2012

Authors and Affiliations

  1. 1.Graduate School of Management and EconomicsTohoku UniversityAoba-ku, SendaiJapan

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