1. Saving Behavior and Velocity of MoneyCirculation
2. Self-organized Financial Instability
By drawing an analogy of the collapses ofa sand pile and financial crashes due to cascading bankruptcy, this work aimsto understand the sources of instability in the financial system and the factthat financial crashes have become bigger but rarer. It is argued that the boomand bust of credit could emerge from a self-organized process without anyexogenous shocks. The occurrence of financial crashes is uncertain andimpossible to predict unless perfect information about the network structure isgiven. By simulation, we found that the distribution of the size of financialcrash follows the power law while that of crash interval is exponential. Atrade-off between the size and the frequency of crashes was also discovered.
3. Multi-player Ultimatum Game: Theory and Experiment
The formation process of the fairnesspreference in ultimatum games remains an intriguing puzzle. we put the questioninto a repeated and multiplayer framework and attempts to provide a theoreticalexplanation that is further tested through human experiments. In this theory,the players are assumed to be directional learners whose collective behaviorsare characterized by a set of master equations with path-dependent transitionrates. With this model, two predictions are drawn: (1) directional learninglead to a Nash equilibrium but not necessarily a subgame perfect state, and (2)after learning, proposers exhibit a high concentration of offers at theequilibrium offer while responders hold on to the variety of demands. Theseconclusions are supported by the experimental results which confirm that (1)the evolution process and the equilibrium results are in agreement with the theory,and (2) the properties of directional learning are observed in the behaviors ofhuman players.
4. Impactsof the Liquidity Regulation over Banks on Macroeconomic Stability
In response to the deficiencies of financialregulation revealed by this crisis, the Basel Committee on Banking Supervisionpublished the Basel III documents: A global regulatory framework for moreresilient banks and banking systems in order to strengthen the regulation,supervision, and risk management of the banking sector. However,up to present, people scarcely obtain a consistent and definite answer on theeffects of these new regulations. Indeed, the changes in liquidity requirementsinvolved in Basel III is almost an experiential and intuitive response to thisrecent crisis, how these fresh regulations affect banking conditions andultimately output remains an open question. We show that the LCR probably donot yet a qualified micro prudential regulation under its definition in somespecified stressed scenarios. We discover a novel positive feedback effectimplying in the LCR that can be triggered endogenously. In view of this, ouranalysis clearly indicates that the LCR regulation as a prescription for thehealth of banking system potentially turns out to be a poison to the wholeeconomy under some specific circumstances.