What is it about?
This article describes an equilibrium model of the interest rate that banks charge each other for loans, given the aggregated loan requirements and the aggregated loanable funds of the banking system.
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Why is it important?
An equilibrium model supplies the reference point for deciding whether an item is overpriced or underpriced, and therefore whether the price is more or likely to fall or to rise. Such a model is especially useful in a game, because the data required of the model is readily available. In a game where participants manage banks that deal with retail customer managed by other participants, the model automates the flow of funds among banks.
Perspectives
Games that simulate everyday-world events are useful in teaching and research. In teaching, the simulation simplifies, and therefore enables students to become familiar with simple problems before encountering more complicated, everyday-world problems. In research, problems that are simplified often show interesting unexpected relationships. in this case, we found that the equilibrium position of the interbank interest rate could be captured by a spiced model that is simple, but not obvious.
Precha Thavikulwat
Towson University
Read the Original
This page is a summary of: Interbank Interest-Rate Model for the Banking Business of a Multi-Industry Game, Simulation & Gaming, August 2019, SAGE Publications,
DOI: 10.1177/1046878119858376.
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