Periodic Reporting for period 1 - MACROPRU (Investigating new policies for financial stability that do not create inequality)
Période du rapport: 2021-10-01 au 2023-09-30
The MACROPRU project undertakes a critical investigation of the relationship between macroprudential policies and inequality in the EU countries. At its heart, this research initiative addresses the pressing problem of how these policies, which are designed to ensure financial stability, could inadvertently exacerbate societal disparities, including gender inequalities. The project challenges the standard economic thinking by constructing an advanced agent-based model that is populated with heterogeneous agents. This model enables a comprehensive evaluation of how macroprudential policies ripple through the financial system, thereby affecting the distribution of income and wealth among various societal groups.
The project's importance stems from its recognition of the critical link between financial stability policies and societal inequality, and addresses not only traditional unidimensional aspects but also the multidimensional nature of inequality. While some research has explored the effects of macroprudential policies on inequality, it remains an underexplored area. By shedding light on the redistributive effects of macroprudential policies, as well as on their intricate societal dimensions, including the gender-based inequalities that are visible in many EU countries, the project contributes to designing policies that will promote both financial stability and social equity. Understanding how macroprudential policies impact inequality can lead to more informed decision-making and policies that mitigate disparities in wealth, income and other dimensions of well-being.
The aim of the project was to rigorously quantify the impact of macroprudential regulation across the financial system, real economy and society. To achieve this, the project pursued three distinct yet interconnected objectives. The first objective delved into the intricate mechanisms through which macroprudential policies could influence inequality levels and generate welfare costs in EU countries, in particular in Poland. This encompassed a comprehensive analysis of their effects on various societal groups. The second objective focused on identifying the most advantageous calibrations and combinations of macroprudential tools. This entailed an assessment of their consequences not only on financial stability but also on the real economy and society. The final objective involved the construction of a large data-driven agent-based model. This sophisticated model was designed to study the redistributive effects of macroprudential policies by drawing insights from real-world data and behaviours. In alignment with the broader objectives of the 'Europe 2020' Strategy, this research was dedicated to fostering inclusive growth and reducing inequalities within the EU.
The project's importance stems from its recognition of the critical link between financial stability policies and societal inequality, and addresses not only traditional unidimensional aspects but also the multidimensional nature of inequality. While some research has explored the effects of macroprudential policies on inequality, it remains an underexplored area. By shedding light on the redistributive effects of macroprudential policies, as well as on their intricate societal dimensions, including the gender-based inequalities that are visible in many EU countries, the project contributes to designing policies that will promote both financial stability and social equity. Understanding how macroprudential policies impact inequality can lead to more informed decision-making and policies that mitigate disparities in wealth, income and other dimensions of well-being.
The aim of the project was to rigorously quantify the impact of macroprudential regulation across the financial system, real economy and society. To achieve this, the project pursued three distinct yet interconnected objectives. The first objective delved into the intricate mechanisms through which macroprudential policies could influence inequality levels and generate welfare costs in EU countries, in particular in Poland. This encompassed a comprehensive analysis of their effects on various societal groups. The second objective focused on identifying the most advantageous calibrations and combinations of macroprudential tools. This entailed an assessment of their consequences not only on financial stability but also on the real economy and society. The final objective involved the construction of a large data-driven agent-based model. This sophisticated model was designed to study the redistributive effects of macroprudential policies by drawing insights from real-world data and behaviours. In alignment with the broader objectives of the 'Europe 2020' Strategy, this research was dedicated to fostering inclusive growth and reducing inequalities within the EU.
The project started with a thorough review of existing research on financial stability and inequality, and explored the methodologies from the mainstream and complexity economics. It also analysed empirical data, such as the Household Finance and Consumption Survey from the ECB, which shaped the project's research agenda. A standout achievement of the project was the creation of an advanced data-driven agent-based model, which was meticulously crafted to simulate the economic interactions and behaviours of diverse agents within selected EU countries. This model effectively incorporates gender-specific attributes, risk perceptions and behavioural patterns, thus offering a dynamic and realistic representation of the agents' decision-making processes. It thereby illuminates the nuanced dimensions of inequality in the EU countries. This advanced modelling approach serves as a potent tool for policymakers, economists and researchers. It will empower them to conduct scenario analyses and policy simulations, which will contribute to more informed decision-making processes.The collaboration with Amazon Web Services HPC enabled an efficient cloud-based simulation and project result dissemination. The AWS services streamlined various project aspects, including data storage, resource scaling, simulation accuracy enhancement and secure data storage. Storing data in accessible formats also aligned with the open data principles of the European Commission. The simulation explored macroprudential instruments and found that effective calibrations and combinations were vital for specific EU countries. Interestingly, the simulations revealed that while Poland achieved financial stability after the global financial crisis, its policy mix had significant adverse effects on income and wealth distribution for the middle percentiles. One of the primary avenues for exploiting the project’s results is through their direct influence on policy decisions. By shedding light on the redistributive effects of macroprudential policies, the project contributes to designing policies that can promote both financial stability and social equity. This insight could be instrumental in shaping future macroprudential regulations within the EU. The research, which was conducted in collaboration with central banks and international institutions, also established a direct link between the project's findings and influential regulatory bodies. These institutions can benefit from the project's insights when formulating and revising macroprudential policies. At the same time, the research outcomes have broader implications for the academic and research communities. They provide a foundation for further investigations into the complex interplay between financial stability and inequality. The project maintains a dedicated website, “Monetarist in Heels”, which offers detailed research information. The findings have been shared through scholarly publications, preprints, and events, including seminars, workshops and conferences. The project uses social media platforms such as X, LinkedIn and Facebook along with the University of Oxford's channels for continuous engagement and global updates. In summary, the project actively exploits its findings by influencing policy decisions as well as by contributing to academic research. Simultaneously, the project employs a multifaceted dissemination strategy that includes publications, events, public engagement and online platforms to ensure that its insights reach a diverse audience.
The project has made significant advancements in multiple areas. It introduced an advanced agent-based model for the comprehensive investigation of inequalities in the EU countries. The project goes beyond traditional income and wealth inequality analysis by incorporating multidimensional measures for a holistic understanding of the effects of policies. It focuses on identifying the most beneficial macroprudential instrument calibrations for different cycles, thereby emphasising policy tailoring. The aim of the project is to provide evidence-based recommendations to policymakers by conducting detailed socioeconomic analyses and offering a broader view of the effects of policies. Using AWS for the ABM simulations is an innovative approach that improves scalability and precision. The cloud-based simulation framework will be shared with other researchers for collaboration. The project has a significant potential impact, which will benefit both policymakers and regulators in designing equitable policies. It addresses gender inequalities and promotes transparency and collaboration in research practices, thus contributing to societal welfare within the EU.