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E Pluribus Unum: Macroeconomic modelling for multi-agent economies

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  • Assenza, Tiziana
  • Delli Gatti, Domenico

Abstract

From the macroeconomist's viewpoint, agent based modelling has an obvious drawback: it makes impossible to think in aggregate terms. The modeller, in fact, can reconstruct aggregate variables only “from the bottom up” by summing the levels of a myriad of individual variables. We propose a modelling strategy which reduces the dimensionality of an agent based framework by replacing the actual distribution with the first and higher moments of the distribution itself. We put this strategy at work in a Macroeconomic and Agent Based Model (M&ABM) of the financial accelerator in which firms' heterogeneous degrees of financial robustness affect investment in a Greenwald-Stiglitz setting.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 37 (2013)
Issue (Month): 8 ()
Pages: 1659-1682

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Handle: RePEc:eee:dyncon:v:37:y:2013:i:8:p:1659-1682

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Web page: http://www.elsevier.com/locate/jedc

Related research

Keywords: Financial fragility; Heterogeneity; Stochastic aggregation; Business fluctuations;

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References

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  1. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
  2. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
  3. Bruce C. Greenwald & Joseph E. Stiglitz & Andrew Weiss, 1984. "Informational Imperfections in the Capital Market and Macro-Economic Fluctuations," NBER Working Papers 1335, National Bureau of Economic Research, Inc.
  4. Bruce C. Greenwald & Joseph E. Stiglitz, 1988. "Financial Market Imperfections and Business Cycles," NBER Working Papers 2494, National Bureau of Economic Research, Inc.
  5. Cordoba, Juan Carlos & Ripoll, Marla, 2010. "Collateral Constraints in a Monetary Economy," Staff General Research Papers 32123, Iowa State University, Department of Economics.
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  8. Stephanie Schmitt-Grohe & Martin Uribe, 2001. "Solving Dynamic General Equilibrium Models Using a Second-Order Approximation to the Policy Function," Departmental Working Papers 200106, Rutgers University, Department of Economics.
  9. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
  10. Krusell, P & Smith Jr, A-A, 1995. "Income and Wealth Heterogeneity in the Macroeconomic," RCER Working Papers 399, University of Rochester - Center for Economic Research (RCER).
  11. M. Gallegati & A. Palestrini & D. Gatti & E. Scalas, 2006. "Aggregation of Heterogeneous Interacting Agents: The Variant Representative Agent Framework," Journal of Economic Interaction and Coordination, Springer, vol. 1(1), pages 5-19, May.
  12. Ben Bernanke & Mark Gertler, 1987. "Financial Fragility and Economic Performance," NBER Working Papers 2318, National Bureau of Economic Research, Inc.
  13. White, Michelle J, 1989. "The Corporate Bankruptcy Decision," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 129-51, Spring.
  14. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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