A new study proposes a solution for mitigating the increasingly risky nature of financial markets, based on an analysis of systemic risk in financial networks.
A tax on individual transactions between financial institutions—based on the level of systemic risk that each transaction adds to the system—could essentially eliminate the risk of future collapse of the financial system, according to a new study recently published in the journal Quantitative Finance. It relies on an analysis of the networks of the banking system, using central bank data from Austria.
“When banks collapse, it costs a lot to bail them out, and that money usually comes from the public, from taxpayers” explains IIASA researcher Stefan Thurner, who coauthored the study with IIASA researcher Sebastian Poledna. The proposed tax would go into a government fund which could be used to bail out a struggling bank, for example. “You could also consider it a form of systemic risk insurance,” says Thurner.
Financial institutions are linked by multiple types of transactions, which Thurner and Poledna have modeled in a detailed network analysis. These transactions include deposits and loans between financial institutions. The study is the first to quantify the systemic risk that individual transactions add to the system.
‘’Since the international financial crisis in 2007 and 2008, policymakers have been discussing new ways to regulate the system in order to help avoid a repeat scenario.
The new study provides just that,” says Poledna. While introducing such a tax would require some work, the researchers argue that the data are there and the technical effort required for implementation is not overwhelming. Thurner has already presented the work to interested policymakers, supervisors, and central banks in the EU and Mexico.
“There’s currently a lot of discussion about a Tobin tax in the European Union, but the version they are proposing would tax every transaction at a flat rate. The tax we are proposing would not have to be large, in order to act as an incentive scheme for avoiding transactions that would be the most harmful for the system—banks would try to avoid transactions that generate that risk,” says Thurner.
Poledna S, Thurner S (2016). Elimination of systemic risk in financial networks by means of a systemic risk transaction tax. Quantitative Finance doi:10.1080/14697688.2016.1156146
MSc Katherine Leitzell | idw - Informationsdienst Wissenschaft
Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO
Europe's microtechnology industry is attuned to growth
10.03.2017 | IVAM Fachverband für Mikrotechnik
Scientists from the Excellence Cluster Universe at the Ludwig-Maximilians-Universität Munich have establised "Cosmowebportal", a unique data centre for cosmological simulations located at the Leibniz Supercomputing Centre (LRZ) of the Bavarian Academy of Sciences. The complete results of a series of large hydrodynamical cosmological simulations are available, with data volumes typically exceeding several hundred terabytes. Scientists worldwide can interactively explore these complex simulations via a web interface and directly access the results.
With current telescopes, scientists can observe our Universe’s galaxies and galaxy clusters and their distribution along an invisible cosmic web. From the...
Temperature measurements possible even on the smallest scale / Molecular ruby for use in material sciences, biology, and medicine
Chemists at Johannes Gutenberg University Mainz (JGU) in cooperation with researchers of the German Federal Institute for Materials Research and Testing (BAM)...
Germany counts high-precision manufacturing processes among its advantages as a location. It’s not just the aerospace and automotive industries that require almost waste-free, high-precision manufacturing to provide an efficient way of testing the shape and orientation tolerances of products. Since current inline measurement technology not yet provides the required accuracy, the Fraunhofer Institute for Laser Technology ILT is collaborating with four renowned industry partners in the INSPIRE project to develop inline sensors with a new accuracy class. Funded by the German Federal Ministry of Education and Research (BMBF), the project is scheduled to run until the end of 2019.
New Manufacturing Technologies for New Products
An international team of researchers led by the University of Bern and the National Physical Laboratory (NPL) has revealed a new way to tune the functionality of next-generation molecular electronic devices using graphene. The results could be exploited to develop smaller, higher-performance devices for use in a range of applications including molecular sensing, flexible electronics, and energy conversion and storage, as well as robust measurement setups for resistance standards.
The field of nanoscale molecular electronics aims to exploit individual molecules as the building blocks for electronic devices, to improve functionality and...
Researchers have studied how light can be used to "see" the quantum nature of an electronic material. They managed to do that by capturing light in a net of...
19.06.2017 | Event News
13.06.2017 | Event News
13.06.2017 | Event News
19.06.2017 | Earth Sciences
19.06.2017 | Physics and Astronomy
19.06.2017 | Materials Sciences