Acta Oeconomica Pragensia 2015, 23(4):23-42 | DOI: 10.18267/j.aop.479

An updated Model of Financial Fragility based on General Equilibrium Analysis

Ondřej Machek, Luboš Smrčka
Vysoká škola ekonomická v Praze, Fakulta podnikohospodářská (email: ondrej.machek@vse.cz; smrckal@vse.cz). Tento příspěvek byl realizován za podpory projektu TAýR TD020190.

Financial fragility and instability of banking sectors has received increased academic attention due to recent financial crises around the world. The objective of the article is to extend and adapt a previously created financial fragility model of the Czech financial sector in order to reflect its specific conditions. It introduces the concept of minimum required reserves and uses consistent sources of data collected from annual reports of Czech banks in 2013. Besides the prediction of default of households, the model also allows a prediction of key macroeconomic variables such as the inflation and unemployment rates. However, some of the issues of this class of models - in particular, the impossibility to measure some of its exogenous parameters - remain unresolved and present a challenge for the future development of the model.

Keywords: financial fragility, banking sector, general equilibrium, Czech Republic
JEL classification: C68, E4, E5, G11

Published: August 1, 2015  Show citation

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Machek, O., & Smrčka, L. (2015). An updated Model of Financial Fragility based on General Equilibrium Analysis. Acta Oeconomica Pragensia, 23(4), 23-42. doi: 10.18267/j.aop.479
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