MACROPRU · Investigating new policies for financial stability that do not create inequality
Horizon 2020 — Marie Skłodowska-Curie Actions
- Duration
- 2021-10-01 → 2023-09-30
- EU contribution
- €224,934
- Participants
- 1
- Scheme
- MSCA-IF
Lines connect the coordinator with its partners.
Results in brief
Investigating new policies for financial stability that do not create inequality
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.
Data: CORDIS, © European Union
Project 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.""
Original text from CORDIS.
Participants
- THE CHANCELLOR, MASTERS AND SCHOLARS OF THE UNIVERSITY OF OXFORD · OxfordCoordinatorUnited Kingdom
Links
Data: CORDIS, © European Union