When complexity meets finance: A contribution to the study of the macroeconomic effects of complex financial systems

The Institute of Economics will hold a webinar meeting as part of its Seminar Series on Tuesday, April 13, 2020: Alberto Russo from the Polytechnic University of Marche & Universitat Jaume I of Castellon de la Plana will present the paper "When complexity meets finance: A contribution to the study of the macroeconomic effects of complex financial systems".

Abstract:

In the last decade, complexity economics has emerged as a powerful approach to the understanding of the most relevant factors influencing economic development. The concept of economic complexity has been applied to the study of different economic issues such as economic growth, technological change and inequality. This work represents a first step towards the application of this concept to the study of the financial side of the economy, and particularly of the macroeconomic effects of rising financial complexity. In this paper, the authors present an agent-based macroeconomic model including an increasingly complex financial sector, characterized by the presence of Collateralized Debt Obligations with different seniorities next to more standard assets, like bonds and commercial papers. Simulations results suggest that financial complexity exerts major economic effects: while financial engineering makes securitized loans very attractive and opaque assets, the disperse interaction among different agents and financial institutions generated by these complex financial instruments shapes the behavior of the economies and allows for the diffusion of financial distress.

All interested participants are welcome to join online at the following link. External participants need to contact the organisers via email to grant access to the seminar.