A predator–prey model to explain cycles in credit-led economies

Dejuán, Óscar; Dejuán-Bitriá, Daniel

doi:10.4337/roke.2018.02.01

Cited by 8 publications

(6 citation statements)

References 23 publications

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“…Second, the liquidity ratio [46,47], which is calculated by dividing current assets by current liabilities, shows the ability of the bank to meet its short-term obligations; namely, if this ratio is greater than one, the bank will not have liquidity problems in the short-term. Third, indebtedness ratios [48][49][50][51], long-term, short-term and total indebtedness, which are calculated by dividing non-current liabilities, current liabilities and total liabilities, respectively, by the equity, indicate the proportion of debt over equity and, in general, they are better the smaller they are.…”

Section: Methodsmentioning

confidence: 99%

Sustainable and conventional banking in Europe

2020

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At the end of the 20 th century a new banking model, the so-called ethical banking, emerged becoming the maximum exponent of a socially responsible investment. The financial crisis in 2008 led to a distrust of the conventional financial system and consequently investors began to look with interest this new banking, which only invests in ethical activities and products, with social and environmental criteria, total transparency and a democratic management. The aim of this article is to analyze the economic structure of ethical banking, compared to that of conventional banking, by paying attention to its liquidity, coverage and solvency. Specifically, We compare the financial statements of Triodos Bank, the main European ethical bank belonging to the Global Alliance for Banking on Values, with two of the main conventional banks of each of the five countries in Europe in which it operates. To do this, we apply a financial and economic analysis to the period from 2015 to 2018, the means difference test and analysis of variance on an array of financial ratios and, finally, probit regressions. The results reveal that ethical banking is growing more than conventional banking and it presents greater liquidity and solvency, although, in general terms, its profitability is not higher. In conclusion, both savers and investors have guarantees that their savings are invested not only in a responsible but also in a confident way in ethical banking.

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Section: Methodsmentioning

confidence: 99%

Sustainable and conventional banking in Europe

2020

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“…We assume that the main characteristics of the forward-fleeing Q3 phase during any financial crisis are as follows: predators developed and marketed toxic products, which often contained a lag effect (not until later would the prey realize that they had been caught in a debt trap- Dejuán and Dejuán-Bitriá, 2018). Unaware of the real risk, which was hidden, excited prey had flocked the market under a contagion effect.…”

Section: Supply and Demand Curves And The Economic Cyclementioning

confidence: 99%

“…We assume that the main characteristics of low‐vigilance Q1 phase during any financial crisis are as follows: regulators‐prey interactions prevail; however, regulations, which are meant to protect prey, start becoming lax (laissez‐faire being considered in our framework a necessary antecedent to financial crises). There are few predators but a large number of healthy potential prey, who display a reverse risk‐aversion behavior (or put differently, speculation, which is at the heart of over‐indebtedness—Dejuán and Dejuán‐Bitriá, 2018). Demand (supply) for mortgages is at its maximum (minimum), paralleling the number of predators and prey in the market.…”

Section: A Framework Of Financial Predation On Consumers and Economicmentioning

confidence: 99%

“…Decades ago, economists applied predatory mechanisms and Lotka‐Volterra (LV) equations to financial market systems (Goodwin, 1967; Samuelson, 1971; Crookes and Blignaut, 2016). Currently, efforts are being made to explain economic phenomena using LV equations (Henry, 2012; Zhang, 2012; Dejuán and Dejuán‐Bitriá, 2018; Ditzen, 2018), but rarely treat aggregates and flows as a dynamical system (Ryoo and Skott, 2008). To our knowledge, no such attempt has been convincingly made in marketing theory.…”

Section: Introductionmentioning

confidence: 99%

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From wheel of fortune to wheel of misfortune: Financial crises, cycles, and consumer predation

Mesly

Shanafelt

Huck

et al. 2020

Journal of Consumer Affairs

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Predator-prey dynamics are widely used in ecology but seldom utilized in economics and marketing, despite their ability to express financial market agents' behaviors when considered in combination with economic cycles and financial crises. This multidisciplinary paper presents a stylized framework of a market cycle that combines the notions of supply and demand and predator-prey interactions between buyers and sellers of housing mortgages. We illustrate our framework using data from the Global Financial Crisis and a Lotka-Volterra predator-prey model. We find that with our framework we are able to capture the dynamics of the market, particularly the peak and decline in the number of sellers and sold subprime mortgages. Our framework sheds a new light on consumer behaviors, pinpointing how they can put themselves into vulnerable prey positions. This paper is one of the first of its kind to propose market phases and predator-prey dynamics nested in economic cycles and consumer buying trends.

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“…A detailed list of such products and behaviors can be found in Appendix 3. The notion of predator-prey dynamics has been used in economic science in the past, although sparingly (Dejuàn & Dejuàn-Bitrià, 2018;Ditzen, 2018;Henry, 2012;Samuelson, 1971;Zhang, 2012).…”

Section: Introductionmentioning

confidence: 99%

Dysfunctional Markets: A Spray of Prey Perspective

Mesly

Shanafelt

Huck

2021

Journal of Economic Issues

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We revisit the theory of financial crises using a predator-prey metaphor, highlighting the relationship between greed, risk aversion and debt accumulation and aggregating concepts from economics, finance and psychology. We argue that regulations that are implemented inefficiently, with weak enforcement or at the wrong time can have deleterious effects on the market, worsening the ailment they initially intended to correct and leaving a spray of prey in their wake. To illustrate our hypothesis, we examine the role of regulations in the years leading up to and during the Global Financial Crisis (GFC) in the U.S., when the Federal Reserve tried to restrain the over-heated housing market fuelled by the predatory mortgage frenzy and the increased use of securitization in risk-hiding financial tools such as Collateralized Debt Obligations (CDOs). Our results indicate that deleterious government interventions may act as a chemotherapy of sorts, causing harm followed by a slow recovery. This understanding can help governments draft better regulations to lower market frictions and better protect investors.

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A predator–prey model to explain cycles in credit-led economies

Cited by 8 publications

References 23 publications

Sustainable and conventional banking in Europe

Sustainable and conventional banking in Europe

From wheel of fortune to wheel of misfortune: Financial crises, cycles, and consumer predation

Dysfunctional Markets: A Spray of Prey Perspective

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