Banking, Shadow Banking, and Financial Regulation : An Agent-based Approach

The field of “macro-finance”, i.e. the intersection of financial economics and macroeconomics, received much attention [Morley (2015)] through the integration of banking, corporate finance and financial markets into macroeconomic models using various methodologies. Although standard (equilibrium) macro-models are still used, they are typically just augmented with ad-hoc assumptions when it comes to financial sector activity. To push policy-orientated macroeconomic modeling beyond this approach, agent-based computational economic (ACE) models has been identified as a new class of models that is able to overcome these deficiencies by enabling the modeling of dynamics resulting from the endogenous formation of systemic risk, bubbles and contagion effects. Therefore, these models help to gain insights into newly identified sources of financial instability and serve as suitable experimental labs to test the performance of monetary, fiscal and financial stability policies that aim to mitigate the negative effects of such phenomena in order to provide proper guidance for decision makers in central banks and financial supervisory authorities. The ultimate goal of the field is to contribute to the development of a regulatory framework that ensures the stability of the financial system without suppressing its growth-supporting capacity. This dissertation consists of papers that cover i) financial stability issues that has been identified as main sources of systemic risk being held responsible for the occurrence of the recent global financial crisis, ii) potential extensions of the deficient regulatory framework to mitigate accompanied externalities as well as iii) possible conflicts with monetary policy and iv) the regulatory inclusion of shadow banking activities.



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