22 March 2011

Essex Professor appointed to advise Indian central bank

Colchester Campus

Leading economist, Professor Sheri Markose has been appointed as consultant to the Reserve Bank of India (RBI) to provide expert guidance at their Financial Stability Division on how to develop large scale models that can monitor the build up of financial risk in India. This also includes the transition to an information technology based framework for systemic risk analysis. 

Professor Markose is due to visit the RBI next month to help set up the financial network based simulators for systemic risk analysis that she has developed at the University of Essex, where she is based in the Department of Economics. 

Her appointment follows on from a series of talks and tutorials she gave at the RBI Financial Stability Division on the need to take a new complexity perspective on how financial risk escalates and also on the need to harness ICT tools to automate financial data access in India. 

Professor Markose explained: “The recent financial crisis has exposed the lack of modeling tools that can show the highly interconnected nature of financial firms and also how risk gets concentrated in a few hands. Traditional macro-econometric tools abstract away from such institutional and firm level interactions. Central banks the world over have recently begun to set up Financial Stability Boards and I am delighted to be able to help RBI with this.”

One of Professor Markose’s first tasks will be to help the RBI to establish computational modelling platforms for financial stability analysis over a two year period. She added: "Financial crises arise from excessive leverage or too much credit. This is no different from economic activity that leads to environmental pollution. Clearly, the ‘clean up’ costs have had to be borne by tax payers rather than by financial firms who caused the crisis. Activities that appear rational at the level of the individual are not conducive to stability for the system as a whole.  Without holistic visualization techniques like financial network work analysis, it is hard to see how crises build up and spread."

 

http://www.essex.ac.uk/news/event.aspx?e_id=2939