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Investigating new policies for financial stability that do not create inequality

Project description

Calibrating macroprudential policies to reduce social inequality

Aimed at preventing instability of the financial system, macroprudential policies increase the resilience of the financial system. the EU-funded MACROPRU project will examine the relationship between macroprudential policies and social inequality. It will apply cutting-edge, agent-based simulation techniques to uncover the redistributive effects of macroprudential policies. From a social welfare perspective, the project’s aim will be to identify the optimality of the macroprudential tools. The findings will shed light on the conclusions extracted from the system-wide stress-testing for macroprudential purposes by the European Central Bank (ECB). Results will also advise policymakers and central bankers on how to calibrate macroprudential policies to minimise adverse social effects and to reduce inequality.

Objective

"The primary aim of the action is to investigate how new macroprudential policies can influence financial stability without contributing to inequality in society. In this project we aim to apply cutting-edge, agent-based simulation techniques to uncover the redistributive effects of macroprudential policies and to examine the combination optimality of the macroprudential tools from the social welfare perspective. The results of this project will complement the conclusions extracted from the ECB system-wide stress-testing exercises by providing data on the rise of inequality in EU countries due to the adoption of new financial regulations. It will also supplement the macroeconomic impact assessment for the Basel III reforms (cost-benefit ""Growth-at-Risk"" approach).

This project expands our knowledge about a new, innovative tool, namely agent-based modeling, that can be used in financial oversight. It provides us with the practical knowledge of how to take into account the heterogeneity of the agents in the models and how to apply new Bayesian estimation techniques. The results of the project may guide policymakers and central bankers on how to reshape financial regulations and to calibrate macroprudential policies in order to minimize adverse social effects and to reduce inequality (by supporting a social policy). The project is consistent with the European Commission’s support on research programmes on the public sector and social innovation that is described in the Europe 2020 Flagship Initiative Innovation Union.

The researcher will be fully integrated into Prof. J. Doyne Farmer’s team at the INET Oxford and at the Mathematical Institute of the University of Oxford. The Curie IF will give the applicant the opportunity to perform relevant and state-of-the-art research in the best institute of complexity economics in the world, to re-enforce her position as an independent research group leader and to initiate new long-term collaborations."

Coordinator

THE CHANCELLOR, MASTERS AND SCHOLARS OF THE UNIVERSITY OF OXFORD
Net EU contribution
€ 224 933,76
Address
WELLINGTON SQUARE UNIVERSITY OFFICES
OX1 2JD Oxford
United Kingdom

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Region
South East (England) Berkshire, Buckinghamshire and Oxfordshire Oxfordshire
Activity type
Higher or Secondary Education Establishments
Links
Total cost
€ 224 933,76