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Tracking Financial Instability Contagion: modeling and data calibration

September 11, 2017, 3:00 pm - 4:00 pm
Location Science Hall - 102 the Sokol Room
Posted InCollege of Science and Mathematics
Mathematical Sciences Seminar Colloquium

Youngna Choi, Montclair State University


This article validates an early warning system called \emph{the market instability indicator} proposed by Choi and Douady (2014). The indicator, based on multi-agent model and theories of dynamical systems, is estimated for different economic agents using  the macroeconomic data of the United States and selected Eurozone countries. The empirical result suggests quantitative evidence of financial instability contagion by tracking the risk transmission in the U.S. Subprime Mortgage Crisis and the European Debt Crisis. The article also provides reasoning about the limitations of available macroeconomic data in monitoring the level of financial instability, and suggests how data collection practices can be improved.