The project provides new ideas and policy proposals to contain the spread of systemic risk in the financial system through appropriate regulation of financial markets and intermediaries, as well as the design of monetary policy.
Systemic risk can be viewed as the spread of financial fragility in the economy on a scale that leads to a financial crisis. The subprime crisis of 2007, the Global Financial Crisis of 2008, and the extraordinarily long and painful recession that ensued, have dramatically unveiled the recent build-up of systemic risk. This project follows the agent-based approach to analyze credit networks and develops models and datasets that incorporate financial factors, economic policy, heterogeneity, non-linearity, and networks with the ultimate goal of devising ways to protect and prevent society from the risk of a new Global Financial Crisis.