Analysis of the influences of negative interest rate on operative collapses of financial institutions using agent-based simulation

Europe and Japan have adopted a negative interest rate policy as part of their monetary easing measures. The difficulty of such a policy is that, despite claimed benefits associated with increased lending demand, concerns exist regarding an increased burden on private financial institutions due to the application of negative interest rates to excess reserves. In this paper, we focus on the risks associated with increased investment of surplus funds for the operations of financial institutions. The authors have proposed an agent model of interlocking specific bankruptcy that arises through a change in the financial situation due to market price fluctuations involving assets held by financial institutions. To extend the model to deal with macro market shock, we describe decision-making regarding funds that are surplus to the operation of financial institutions. Additionally, we analyze the impact on the financial system of price declines involving marketable assets.