Toward Alternative Programs for Financial Stability : Digital Currency and Financial Network Model

As financial crises have serious impacts on real economy, it is believed to keep financial stability is critical to preventing damage and bring growth to the economy. Though central banks and regulation authorities have endeavored to eliminate the instability through the traditional macro and microprudential policies, financial markets have not reached stability as desired. We conduct a documentary research in order to offer some alternatives to the failing traditional policies in pursuit of financial stability. This paper especially tries to suggest alternative programs for obtaining financial stability along with the adoption of the network model as macroprudential and digital currency by central bankers as a lender of last resort. An interdependent network formed with financial institution network and financial market network gives a more accurate picture of a financial system. A multiplex network model informs that the financial stability depends on the interplay of the contagion processes. Digital currencies rooted in distributed ledger technology(blockchain) seem to be safer than central bank payment systems. Thus, this study notes that the introduced programs, such as network linkages to predict bank defaults and the adoption of digital currency, should be considered very effective. We expect our alternative approaches to financial stability will be seriously taken into consideration by authorities who are interested in boosting economic growth.