FOCUS
10 Years After the
Crisis: Modelling Meets
Policy Making
January 14-16, 2019 • Fields Institute
Organizers: Matheus Grasselli (McMaster University),
William Hynes (Organisation for European Cooperation
and Development) and Colin McFayden (École des
hautes études en sciences sociales, Paris)
Ten years ago, the world faced an international
financial crisis unparalleled since the Great
Depression. Largely sparked by a widespread
mortgage and housing bust in the US and
unexpected failure by global finance services firm
Lehman Brothers, global markets immediately
sank. This eventually led to massive bank
bailouts, bankruptcies, and foreclosures.
But what have we learned over the last
decade? Are we any better prepared to
predict similar catastrophic events?
On January 14-16, 2019, a conference with the
Fields Institute Centre for Financial Industries
and the New Approaches to Economic Challenges
(NAEC) of the Organisation for Economic Co-
operation and Development was held to pose
this very question. Dozens of leading academic
experts and policy makers gathered to reflect on
the lessons learned over the past 10 years.
“ARE WE READY FOR
THE NEXT CRISIS”?
Bank of Canada, the Federal Reserve and the
Canadian financial regulatory authority also
participated, as did several representatives
from the banking and high‑tech industries.
The discussions began with a number of mini-
courses with leading academics on issues
such as Complexity Economics, Analysis and
Agent-based (ABM), Asset Price Bubbles,
Networks and Systemic Risk, and Blockchain.
The conference offered different perspectives on the
financial system, how it works, develops endogenous
shocks, and how it could be regulated. The outcomes
will inform the NAEC book on the Financial System,,
edited by Patrick Love, which is nearing completion.
Collectively mathematicians, physicists,
computer programmers, economists and
policymakers came to some important conclusions
about modelling and policy-making:
• The building blocks of traditional economic
models have their shortcomings, including the
The discussions included how to model
assumptions on agents (lack of heterogeneity)
financial markets and their interactions with the real
and their behaviour (rational expectations). There
economy and featured speakers such as Andy Lo
has been too little consideration of cycles and
(MIT), John Geanokopolos (Yale University) and Blake
interactions of financial products and practices
LeBaron (Brandeis University). Themes included
(the leverage cycle and interplay between
the Complexity of the Financial System (ABM and
leverage, collateral, and asset prices).
networks), Cyber‑security, and the Financial System,
Financialization and Inequality, Climate Finance,
• Alternatives and new modelling tools and
Behavioural Finance, and a final round table
techniques are needed to improve our
discussion asking “Are We Ready for the Next Crisis?”
understanding of systems, such as Network ABM
and Bayesian Graphical Models.
A number of senior Canadian officials and
policymakers from Finance Canada, the
10