"Animal spirits" and bank's lending behaviour, a disequilibrium approach

Chiarella, C; Di Guilmi, C; Zhi, T

"Animal spirits" and bank's lending behaviour, a disequilibrium approach

Chiarella, C Di Guilmi, C

Zhi, T

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Publication Type:: Journal Article
Citation:: Studies in Nonlinear Dynamics and Econometrics, 2019
Issue Date:: 2019-01-01

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Field	Value	Language
dc.contributor.author	Chiarella, C	en_US
dc.contributor.author	Di Guilmi, C https://orcid.org/0000-0001-7786-039X	en_US
dc.contributor.author	Zhi, T	en_US
dc.date.available	2020-05-25T19:04:49Z
dc.date.issued	2019-01-01	en_US
dc.identifier.citation	Studies in Nonlinear Dynamics and Econometrics, 2019	en_US
dc.identifier.issn	1081-1826	en_US
dc.identifier.uri	http://hdl.handle.net/10453/134568
dc.description.abstract	©2019 Walter de Gruyter GmbH, Berlin/Boston 2019. The paper analyses from a disequilibrium perspective the role of banks' "animal spirits" and collective behaviour in the creation of credit that, ultimately, determines the credit cycle. In particular, we propose a dynamic model to analyse how the transmission of waves of optimism and pessimism in the supply side of the credit market interacts with the business cycle. We adopt the Weidlich-Haag-Lux approach to model the opinion contagion of bankers. We test different assumptions on banks' behaviour and find that opinion contagion and herding amongst banks play an important role in propagating the credit cycle and destabilizing the real economy. The boom phases trigger banks' optimism that collectively lead the banks to lend excessively, thus reinforcing the credit bubble. Eventually the bubbles collapse due to an over-accumulation of debt, leading to a restrictive phase in the credit cycle.	en_US
dc.relation.ispartof	Studies in Nonlinear Dynamics and Econometrics	en_US
dc.relation.isbasedon	10.1515/snde-2016-0095	en_US
dc.subject.classification	Econometrics	en_US
dc.title	"Animal spirits" and bank's lending behaviour, a disequilibrium approach	en_US
dc.type	Journal Article
utslib.for	0102 Applied Mathematics	en_US
utslib.for	1403 Econometrics	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Economics Discipline
utslib.copyright.status	open_access
pubs.publication-status	Published	en_US

Abstract:

©2019 Walter de Gruyter GmbH, Berlin/Boston 2019. The paper analyses from a disequilibrium perspective the role of banks' "animal spirits" and collective behaviour in the creation of credit that, ultimately, determines the credit cycle. In particular, we propose a dynamic model to analyse how the transmission of waves of optimism and pessimism in the supply side of the credit market interacts with the business cycle. We adopt the Weidlich-Haag-Lux approach to model the opinion contagion of bankers. We test different assumptions on banks' behaviour and find that opinion contagion and herding amongst banks play an important role in propagating the credit cycle and destabilizing the real economy. The boom phases trigger banks' optimism that collectively lead the banks to lend excessively, thus reinforcing the credit bubble. Eventually the bubbles collapse due to an over-accumulation of debt, leading to a restrictive phase in the credit cycle.

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http://hdl.handle.net/10453/134568