Interconnectedness is an inherent feature of the modern financial system. While it contributes to efficiency of financial services, it also creates structural vulnerabilities: pernicious shock transmission and amplification impacting banks' capitalization. This has recently been seen during the...

This paper uses reinforcement learning (RL) to approximate the policy rules of banks participating in a high-value payments system. The objective of the agents is to learn a policy function for the choice of amount of liquidity provided to the system at the beginning of the day. Individual...

Policy implications are derived for an inflation-targeting central bank, whose credibility is endogenous and depends on its past ability to achieve its targets. This is done in a New Keynesian framework with heterogeneous and boundedly rational expectations. We find that the region of allowed...

This paper brings novel insights into group coordination and price dynamics in complex environments. We implement an overlapping-generation model in the lab where output dynamics are given by the well-known chaotic quadratic map. This model structure allows us to study previously unexplored...

We model bank management actions in severe stress test conditions using a game-theoretical framework. Banks update their balance sheets to strategically maximize risk-adjusted returns to shareholders given three regulatory constraints and feedback effects related to fire sales, interactions of...

This paper describes a proposal for operating a centralized netting queue for non-urgent interbank payments that involves take-it-or-leave-it offers and allocates liquidity costs using the Shapely value. This method achieves fairness and ensures welfare maximizing netting proposals are agreeable...

This paper focuses on econometric issues, especially the common assumption that monetary payoff is subjects' actual utility, in estimating subjects' learning behaviors using experimental data. I propose a generalized adaptive learning model that nests commonly used learning rules. First, I show...

We construct a 23-country panel data set to consider the effect of central bank projections and forward guidance on private-sector forecast disagreement. We find that central bank projections and forward guidance matter mainly for private-sector forecast disagreement surrounding upcoming policy...

We investigate competition between two intrinsically worthless currencies as a result of decentralized interactions between human subjects. We design a laboratory experiment based on a simple two-country, two-currency search model to study factors that affect circulation patterns and equilibrium...

A model of over-the-counter markets is proposed. Some asset buyers are informed in that they can identify high quality assets. Heterogeneous sellers with private information choose what type of buyers they want to trade with. When the measure of informed buyers is low, there exists a unique and...