A Time Series Analysis of Financial Fragility in the UK Banking System |
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Authors: | Charles A E Goodhart Pojanart Sunirand Dimitrios P Tsomocos |
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Institution: | (1) Bank of England, Threadneedle Street, London, EC2R 8AH, UK;(2) London School of Economics, Financial Markets Group, Houghton Street, London, WC2A 2AE, UK;(3) Said Business School and St. Edmund Hall, University of Oxford, Park End Street, Oxford, OX1 1HP, UK |
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Abstract: | This paper extends the model proposed by Goodhart, Sunirand, and Tsomocos (2004, 2005, 2006) to an infinite horizon setting.
Thus, we are able to assess how the model conforms with the time series data of the UK banking system. We conclude that, since
the model performs satisfactorily, it can be readily used to assess financial fragility given its flexibility, computability,
and the presence of multiple contagion channels and heterogeneous banks and investors.
JEL Classification Numbers C68, E4, E5, G11, G21
We are grateful to seminar participants at the Bank of England, European Central Bank, University of Oxford, University of
Pireaus, 59th International Atlantic Economic Conference, London and especially an anonymous referee for helpful comments
and suggestions |
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Keywords: | Financial fragility Systemic risk UK banking system Default |
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