ABBA: An Agent-Based Model of the Banking System
IMF Working Papers, June 9, 2017
Source details
- Canonical URL
- ABBA: An Agent-Based Model of the Banking System
Other formats
Bibliographic details
- Authors: Jorge A Chan-Lau
- Published: June 9, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484300688.001
Overview and purpose
- ABBA is an agent-based model for analyzing risks in the banking system that incorporates banks’ inherent heterogeneity and adaptive behavior in response to shocks and changes in business conditions and the regulatory environment.
- The model endogenously forms interbank networks driven by banks’ business decisions.
- ABBA can serve as a basic building block for further development of large, bottom-up agent-based macro-financial models.
Model features and bank decision rules
- Banks’ decisions in ABBA are contingent on banks’ balance sheet and capital position.
- The platform allows for:
- dividend payment rules;
- credit expansion decisions;
- dynamic balance sheet adjustment via risk-weight optimization.
- ABBA explicitly models interbank relationships through interbank loan formation and the resulting interconnectedness.
Risks and dynamics analyzed
- The platform is used to illustrate effects of changes in regulatory requirements on:
- solvency risk;
- liquidity risk;
- interconnectedness risk.
- Key model elements and terminology preserved in the platform include:
- agent-based model, creditor bank share, excess reserves, experiences default, insolvent creditor bank, interbank loan, interest bank, lending bank, liquidation loss, loan portfolio, Loans, return on equity, solvency.
Intended applications and contributions
- Illustrative tool to show how regulatory changes propagate through banks’ adaptive behavior and interbank networks.
- Foundation for developing detailed, bottom-up macro-financial agent-based frameworks that capture endogenous network formation and heterogeneous bank responses.
Publication and metadata
- Author: Jorge A Chan-Lau
- Publication date: June 9, 2017
- Series: Working Paper No. 2017/136
- Issue: 136
- Volume: 2017
- Pages: 33
- DOI: https://doi.org/10.5089/9781484300688.001
- ISBN: 9781484300688
- ISSN: 1018-5941
IMF Working Paper — "ABBA: An Agent-Based Model of the Banking System" by Jorge A Chan-Lau (June 9, 2017).
Content in this bundle
- ABBA: An Agent-Based Model of the Banking System