Paper presents new model of interbank loan market
Model should be useful for policy-makers, authors say
A working paper published by the European Central Bank presents a model of the interbank loan market and discusses how policy-makers can use it as a tool.
In Interbank loans, collateral and modern monetary policy, Marcin Wolski and Michiel van de Leur outline what they say is a "novel, agent-based model of the interbank market", featuring endogenous credit risk formation mechanisms.
Their model incorporates a number of stylised facts about bank balance sheets, interbank interest rates and
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