Modelling the 2008 financial economic crisis: triggers, perspectives and implications from systems dynamics Online publication date: Thu, 24-Mar-2016
by Behnido Y. Calida; Polinpapilinho F. Katina
International Journal of System of Systems Engineering (IJSSE), Vol. 6, No. 4, 2015
Abstract: This paper presents a model of the interrelated systems that played a role in the 2008 economic crisis. The analysis was based on some detailed modelling of the banking, real-estate and stock market components of the financial system. The purpose of the study was to understand the interactions among multiple independent systems and also to draw preliminary predictions and policy recommendations that can help to increase the rate of recovery and prevent similar crises in the future. The model uses a 2000-2020 time horizon. Following model development, a systems dynamics (SD) simulation was performed to validate: 1) market recovery date using average US saving rates of the past 30 years; 2) determine effects of policy changes that made bankruptcy declarations more difficult; 3) report on the interest only loans and different 'what-if' scenarios. Actionable insights supporting utility of the model is provided along with future research directions are provided.
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