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Macroeconomic simulation comparison with a multivariate extension of the Markov information criterion

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  • Barde, Sylvain

Abstract

The paper aims to address the issue of comparing agent-based models (ABMs) with more traditional VAR and DSGE models by developing a multivariate extension of the Markov Information Criterion (MIC) of Barde (2017). The univariate MIC measures the informational distance between a simulation model and some empirical data by mapping the simulated data to a Markov transition matrix, and is proven to provide an unbiased measurement for all models reducible to a Markov process. As a result, the MIC can accurately measure distance using only simulated data, for a wide class of data generating processes. The paper first presents the multivariate extension of the MIC and its validation on VAR and DGSE models before carrying the first direct comparison between a macroeconomic ABM and a DGSE model, namely the benchmark ABM of Caiani et al. (2016) and Smets and Wouters (2007).

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  • Barde, Sylvain, 2020. "Macroeconomic simulation comparison with a multivariate extension of the Markov information criterion," Journal of Economic Dynamics and Control, Elsevier, vol. 111(C).
  • Handle: RePEc:eee:dyncon:v:111:y:2020:i:c:s0165188919301927
    DOI: 10.1016/j.jedc.2019.103795
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    More about this item

    Keywords

    Model comparison; Agent-based models; Validation methods;
    All these keywords.

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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