Interbank Rules, Liquidity, and the Capital-Base : Simulation-Based Experiments of the Artificial Interbank Network

This paper brings simulations of an agent-based model of liquidity flows among banks. The model presented here is built on some fundamental, well-established assumptions from the theory of banking and finance. A critical part of the paper introduces a set of base-level rules, aimed at providing banks a tool for deposit insurance. Banks follow these rules with different levels of consistency. Simulation results are favorable to the consistent use of base-level rules in periods of larger volatility in the economy and, in particular, in periods of economic declines. Results have shown that a consistent use of base-level rules can help banks to effectively insure against oscillations in liquidity needs of the external environment and even increase capital also during persistent economic decline and uncertainty in the economy