Financial System Stability
Three essays on financial system stability. The first paper explores the stability of core-periphery interbank networks in a static simulation framework. The results are then compared to a meanfield approximation. While this proves accurate in early rounds of default, precision of this approximation suffers as the simulation evolves. The second essay contributes to the empirical literature on real-world economic and financial networks. We explore the topology of the Spanish bank-firm credit network over the years 1999-2007. In particular we analyze the bipartite clustering between banks and firms with several different statistics. Our research finds strong evidence that the bipartite clustering in the empirical data cannot be explained solely by the degree distributions of banks and firms, but that it is a particular feature of the data. Our calculations also indicate slight temporal trends in bipartite clustering over time. The third essay explores the interaction of monetary and macroprudential policy in a simple agent-based model of the housing market. We show that the impact of monetary policy on housing market dynamics is smaller than the impact of macroprudential regulation, thus reinforcing the call for macroprudential regulation. While both maximum LTV ratios and maximum DSTI ratios are shown to have a significant impact on the market outcome, the impact of these measures are strongly interdependent. Moreover, their performance also depends on the state of monetary policy.