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The Apprentice Wizard: Montetary Policy, Complexity And Learning

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Author Info

  • DOMENICO DELLI GATTI

    ()
    (Institute of Quantitative Methods and Economic Theory, Catholic University of Milan, Largo Gemelli1, I-20123, Milan, Italy)

  • EDOARDO GAFFEO

    ()
    (Department of Economics and CEEL, University of Trento, Via Inama 5, I-38100 Trento, Italy)

  • MAURO GALLEGATI

    ()
    (Department of Economics, Polytechnic University of Marche, Piaz.le Martelli 8, I-60121, Ancona, Italy)

  • ANTONIO PALESTRINI

    ()
    (Department of Law in Society and History, University of Teramo, Via Crucidi 122, I-64100 Teramo, Italy)

Abstract

This paper investigates some central issues of monetary policy by offering a model in which a central bank tries to stabilize fluctuations in aggregate output and inflation in an adaptive complex economy. We resort to evolutionary algorithms to model the central bank behaviour under discretion, and confront the efficiency of discretion with the choice of full commitment to a fixed rule.

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Bibliographic Info

Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal New Mathematics and Natural Computation.

Volume (Year): 01 (2005)
Issue (Month): 01 ()
Pages: 109-128

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Handle: RePEc:wsi:nmncxx:v:01:y:2005:i:01:p:109-128

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Related research

Keywords: Monetary policy; Taylor rule; learning;

References

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  1. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
  2. Lawrence J. Christiano & Christopher Gust, 2000. "The expectations trap hypothesis," Working Paper 0004, Federal Reserve Bank of Cleveland.
  3. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
  4. Gatti, Domenico Delli & Guilmi, Corrado Di & Gaffeo, Edoardo & Giulioni, Gianfranco & Gallegati, Mauro & Palestrini, Antonio, 2005. "A new approach to business fluctuations: heterogeneous interacting agents, scaling laws and financial fragility," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 489-512, April.
  5. Robert J. Hodrick & Edward Prescott, 1981. "Post-War U.S. Business Cycles: An Empirical Investigation," Discussion Papers 451, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Xavier Gabaix, 2004. "Power laws and the origins of aggregate fluctuations," Econometric Society 2004 North American Summer Meetings 484, Econometric Society.
  7. G. Fagiolo & G. Dosi & R. Gabriele, 2004. "Matching, Bargaining, And Wage Setting In An Evolutionary Model Of Labor Market And Output Dynamics," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 7(02), pages 157-186.
  8. Arifovic, Jasmina, 2000. "Evolutionary Algorithms In Macroeconomic Models," Macroeconomic Dynamics, Cambridge University Press, vol. 4(03), pages 373-414, September.
  9. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
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Citations

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Cited by:
  1. E. Gaffeo & M. Catalano & F. Clementi & D. Delli Gatti & M. Gallegati & A. Russo, 2006. "Reflections on Modern Macroeconomics: Can We Travel Along a Safer Road?," Science & Finance (CFM) working paper archive physics/0608148, Science & Finance, Capital Fund Management.
  2. Edoardo Gaffeo & Domenico Delli Gatti & Saul Desiderio & Mauro Gallegati, 2008. "Adaptive microfoundations for emergent macroeconomics," Department of Economics Working Papers 0802, Department of Economics, University of Trento, Italia.
  3. Giorgio Fagiolo & Andrea Roventini, 2012. "Macroeconomic Policy in DSGE and Agent-Based Models," EconomiX Working Papers 2012-17, University of Paris West - Nanterre la Défense, EconomiX.
  4. Riccetti, Luca & Russo, Alberto & Gallegati, Mauro, 2013. "Unemployment benefits and financial factors in an agent-based macroeconomic model," Economics Discussion Papers 2013-9, Kiel Institute for the World Economy.
  5. Neveu, Andre R., 2013. "Fiscal policy and business cycle characteristics in a heterogeneous agent macro model," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 224-240.
  6. Carl Chiarella & Corrado Di Guilmi, 2013. "Monetary Policy and Debt Deflation: Some Computational Experiments," Working Paper Series 10, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
  7. Isabelle SALLE & Marc-Alexandre SENEGAS & Murat YILDIZOGLU, 2013. "How Transparent About Its Inflation Target Should a Central Bank be? An Agent-Based Model Assessment," Cahiers du GREThA 2013-24, Groupe de Recherche en Economie Théorique et Appliquée.
  8. Riccetti, Luca & Russo, Alberto & Mauro, Gallegati, 2013. "Financial Regulation in an Agent Based Macroeconomic Model," MPRA Paper 51013, University Library of Munich, Germany.
  9. Salle, Isabelle & Yıldızoğlu, Murat & Sénégas, Marc-Alexandre, 2013. "Inflation targeting in a learning economy: An ABM perspective," Economic Modelling, Elsevier, vol. 34(C), pages 114-128.

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