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"Procyclicality: what it means and what could be done
| Content Provider | Semantic Scholar |
|---|---|
| Author | Landau, Jean-Pierre |
| Copyright Year | 2009 |
| Abstract | Such a simple description seldom fits the behaviour of financial systems in real life. More likely, following a shock, the path of asset prices and evolution of financial aggregates will display various and highly irregular forms of volatility, with possible non linearities and discontinuities (a good example being liquidity freezes). These are characteristic features of complex systems. "Once such a system is destabilized, it moves away from the linear regime and experience non linear behaviour such as path dependance ... sustained oscillations ... and regime shifts". Indeed, financial systems can be seen as complex systems. They are based on interdependence between multiple actors and counterparties. Transmissions occur through networks whose structure and architecture is constantly changing through financial innovation and regulatory arbitrage. Also, financial systems are "human" systems. Their behaviour is shaped by the way human beings react to shocks in their environment. Herd behaviour has long been known to be an essential feature of financial markets. More subtly, individual reactions, by themselves rational, can, by the virtue of their mutual interaction, produce strong amplification effects. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://www.bis.org/review/r090805d.pdf |
| Alternate Webpage(s) | https://www.bis.org/review/r090805d.pdf |
| Alternate Webpage(s) | http://www.docum-enter.com/get/9mwM-2bzEjKjevUx_2vzgiFWqH4lxP14DbBN0qo7TVo,/Jean-Pierre-Landau-Procyclicality-what-it-means-and.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
