Skip to main content
    • Aa
    • Aa


  • Luca Riccetti (a1), Alberto Russo (a2) and Mauro Gallegati (a2)

We explore the effects of banking regulation on financial stability and macroeconomic dynamics in an agent-based computational model. In particular, we study the minimum level of capital and the lending concentration towards a single counterpart. We show that an overly tight regulation is dangerous because it reduces credit availability. By contrast, overly loose constraints, associated with a high payout ratio, increase financial fragility that, in turn, damage the real economy. Simulation results support the introduction of regulatory rules aimed at assuring an adequate capitalization of banks, such as the Capital Conservation Buffer (Basel III reform).

Corresponding author
Address correspondence to: Alberto Russo, Department of Management, Università Politecnica delle Marche, Piazzale Martelli 8, 60121 Ancona (Italy); e-mail:
Hide All

We are grateful for helpful comments and useful suggestions to participants in the “2nd Macro Banking and Finance Workshop” (organized at Università degli Studi di Roma “Tor Vergata,” September 18–19th 2014), to participants in the IWcee14—“International Workshop on Computational Economics and Econometrics” (Roma, June 26–27th 2014), to participants in the “XXI International Conference on Money, Banking and Finance” (organized at Luiss Università Guido Carli, Roma, December 10–11th 2012, where an earlier version of the paper was presented), and to Maria Giovanna Siena. Authors acknowledge the financial support from the European Community Seventh Framework Programme (FP7) under Socio-economic Sciences and Humanities, grant agreement no. FP7-ICT-255987 (FOC-II), grant agreement no. FP7-ICT-611875 (SYMPHONY), and Sapienza Università di Roma for the research project on Agent-based models for representing the interaction between the real economy and finance. Last but not least, we would like to thank two anonymous referees for constructive critics and valuable suggestions. The usual disclaimer applies.

Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *



Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 7 *
Loading metrics...

Abstract views

Total abstract views: 52 *
Loading metrics...

* Views captured on Cambridge Core between 10th August 2017 - 23rd August 2017. This data will be updated every 24 hours.