2.1.2 ESTUDIOS O INVESTIGACIONES ANTERIORES

Imposing a set of periodic shocks essentially affects the banks’ capability of surviving by two mechanisms: draining of the bank reserves and confusing the banks learning

mechanism. As such, unlike before where the loss in individuals’ consumption was accounted for in bank reserves in a form of conservation, we expect our systems to suffer uncompensated loss due to these shocks.

As before we start by imposing low frequency shocks, where every 15 periods we construct four preference regions (two high liquidity and two low liquidity). We ran 50 independent simulations for the two cases of interbank and no interbank in addition to the case of no banks, using the same parameters values as before (section 6.5.2).

As expected for societies with no banks, the average aggregate consumption level is significantly higher than that for societies with banks. Particularly, the average aggregate consumption level for the 50 simulated societies is 719, 671 compared to 712, 803 for the case of societies where banks work in isolation and 712, 940 for soci- eties with banking interacting in an interbank market. The uncompensated loss we hypothesized is reflected in the fact that, even accounting for the bank reserves, the in- dividuals’ aggregate consumption does not compensate for these reported differences. The aggregate consumption in societies with no banks is still statistically significantly greater than the aggregate consumption for societies with banks even when we add the accumulated bank reserves in these societies (the aggregate accumulated banking reserves is 5, 778 for the no interbank case and an average of 6, 017 for the interbank case). In addition to the cost of banking, our banking system suffered an additional cost reflected in a pure uncounted for waste due to the shocks.

On the other hand, the Gini index for societies with no banks had an average of 0.128, significantly higher than the case of societies with banks working under the interbank market (Gini index average value of 0.114), yet not significantly different from that of societies with banks working in isolation (average Gini index value of 0.118).

As for investment, the amount of successful investment in the productive tech- nology is higher in the case of societies with no banks. The aggregate amount of investments in societies with no banks is 224, 116, significantly higher than that of

Omneia R.H. Ismail – PhD Thesis – McMaster University – CES

societies with banks, where the aggregate successful investment amount is 220, 297 for the no interbank case and 215, 915 for the interbank case. Nevertheless, also in societies with no banks we find the highest amount of wasted investments, where the amount of investments in the productive technology that were prematurely liquidated had an average of 32, 890, significantly higher than that of societies where banks were allowed to be established (compared to an average of 27, 431 for societies with banks and no interbank case and 31, 507 for the interbank case).

Now we examine the performance of our systems under the more extreme case of high frequency shocks. We rerun our simulations (50 independent simulations for each case) under the same parameters values as before, and imposing the shocks every other period. We observe the same patterns with regard to the investments as in the case of the low frequency shocks. The amount successfully invested in the productive technology is significantly higher in the case of societies with no banks (an invested amount of 215, 224) if compared to the case of societies with banks (an invested amount of 213, 606 for the no interbank case and 199, 552 for the interbank case). Such higher successful investments are also, and again as before, combined with higher waste in terms of amounts prematurely liquidated investments in the case of no banks societies is compared to the case of societies with banks working in isolation. The average amount of prematurely liquidated investments in the productive technology is 40, 541 compared to 34, 497 for the societies with banks yet no interbank market. Interestingly when compared to the interbank case, we find that a rather result where allowing banks to interact significantly increased the amounts prematurely liquidated investments to 44, 6330.

Considering the consumption and banks reserves, increasing the frequency of the shocks to every other period reflects a different interesting case. For the aggregate level of individuals consumption, we find that as before the average aggregate level of individuals consumption is significantly higher in the case of societies with no banks (an average level of 706, 953 compared to 701, 537 for the no interbank case

and 699, 024 for the interbank case). Interestingly we find that accounting for bank reserves in societies with banks results in significantly higher amounts if compared to the aggregate consumption for societies with no banks (average level of aggregate bank reserves is 6, 820 for societies with banks working in isolation compared to 9, 301 for the interbank case). That is in the case of high frequency shocks we find that the shocks dramatically affected the individuals in societies with no banks.

Similarly for the Gini index, the average value in the case of no banks societies is significantly higher than that in the case of societies with banks an average level of 0.1181 compared to 0.1058 for the no interbank case and 0.1008 for the interbank case).