IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v86y2013icp102-120.html
   My bibliography  Save this article

Agent-based macroeconomics: A baseline model

Author

Listed:
  • Lengnick, Matthias

Abstract

This paper develops a baseline agent-based macroeconomic model and contrasts it with the common dynamic stochastic general equilibrium approach. Although simple, the model can reproduce a lot of the stylized facts of business cycles. The author argues that agent-based modeling is an adequate response to the recently expressed criticism of macroeconomic methodology because it allows for aggregate behavior that is more than simply a replication of microeconomic optimization decisions in equilibrium. At the same time it allows for absolutely consistent microfoundations, including the structure and properties of markets. Most importantly, it does not depend on equilibrium assumptions or fictitious auctioneers and does therefore not rule out coordination failures, instability and crisis by definition. A situation that is very close to a general equilibrium can instead be shown to result endogenously from non-rational micro interaction.

Suggested Citation

  • Lengnick, Matthias, 2013. "Agent-based macroeconomics: A baseline model," Journal of Economic Behavior & Organization, Elsevier, vol. 86(C), pages 102-120.
  • Handle: RePEc:eee:jeborg:v:86:y:2013:i:c:p:102-120
    DOI: 10.1016/j.jebo.2012.12.021
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268112002806
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Brock, William A. & Hommes, Cars H., 1998. "Heterogeneous beliefs and routes to chaos in a simple asset pricing model," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1235-1274, August.
    2. Edoardo Gaffeo & Domenico Delli Gatti & Saul Desiderio & Mauro Gallegati, 2008. "Adaptive Microfoundations for Emergent Macroeconomics," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 34(4), pages 441-463.
    3. Cincotti, Silvano & Raberto, Marco & Teglio, Andrea, 2010. "Credit money and macroeconomic instability in the agent-based model and simulator Eurace," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 4, pages 1-32.
    4. Paul De Grauwe, 2010. "Top-Down versus Bottom-Up Macroeconomics," CESifo Economic Studies, CESifo, vol. 56(4), pages 465-497, December.
    5. Sander Van Der Hoog & Christophe Deissenberg & Herbert Dawid, 2008. "Production and Finance in EURACE," Working Papers halshs-00339758, HAL.
    6. Charles Goodhart, 2007. "Whatever became of the Monetary Aggregates?," FMG Special Papers sp172, Financial Markets Group.
    7. Seppecher, Pascal, 2012. "Flexibility Of Wages And Macroeconomic Instability In An Agent-Based Computational Model With Endogenous Money," Macroeconomic Dynamics, Cambridge University Press, vol. 16(S2), pages 284-297, September.
    8. George A. Akerlof, 2003. "Behavioral Macroeconomics and Macroeconomic Behavior," The American Economist, Sage Publications, vol. 47(1), pages 25-47, March.
    9. Isabelle Salle & Murat Yildizoglu & Martin Zumpe & Marc-Alexandre Sénégas, 2012. "Modelling social learning in an Agent-Based new keynesian macroeconomic model," Post-Print hal-00779045, HAL.
    10. Aleksander Berentsen & Guido Menzio & Randall Wright, 2011. "Inflation and Unemployment in the Long Run," American Economic Review, American Economic Association, vol. 101(1), pages 371-398, February.
    11. Giovanni Dosi & Giorgio Fagiolo & Andrea Roventini, 2006. "An Evolutionary Model of Endogenous Business Cycles," Computational Economics, Springer;Society for Computational Economics, vol. 27(1), pages 3-34, February.
    12. repec:elg:eechap:17588_14 is not listed on IDEAS
    13. 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.
    14. Sims, Christopher A., 1992. "Interpreting the macroeconomic time series facts : The effects of monetary policy," European Economic Review, Elsevier, vol. 36(5), pages 975-1000, June.
    15. Alan Kirman, 2010. "The Economic Crisis is a Crisis for Economic Theory ," CESifo Economic Studies, CESifo, vol. 56(4), pages 498-535, December.
    16. Alan Kirman, 1993. "Ants, Rationality, and Recruitment," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 137-156.
    17. Michael Woodford, 2008. "How Important Is Money in the Conduct of Monetary Policy?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(8), pages 1561-1598, December.
    18. Carroll, Christopher D & Kimball, Miles S, 1996. "On the Concavity of the Consumption Function," Econometrica, Econometric Society, vol. 64(4), pages 981-992, July.
    19. David Colander & Peter Howitt & Alan Kirman & Axel Leijonhufvud & Perry Mehrling, 2018. "Beyond DSGE Models: Toward an Empirically Based Macroeconomics," Chapters,in: How Economics Should Be Done, chapter 14, pages 212-216 Edward Elgar Publishing.
    20. Gaffeo, E. & Catalano, M. & Clementi, F. & Delli Gatti, D. & Gallegati, M. & Russo, A., 2007. "Reflections on modern macroeconomics: Can we travel along a safer road?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 382(1), pages 89-97.
    21. Sami Al-Suwailem, 2010. "Behavioural Complexity," ASSRU Discussion Papers 1012, ASSRU - Algorithmic Social Science Research Unit.
    22. Matthias Lengnick & Hans-Werner Wohltmann, 2013. "Agent-based financial markets and New Keynesian macroeconomics: a synthesis," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 8(1), pages 1-32, April.
    23. Wright, Ian, 2005. "The social architecture of capitalism," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 346(3), pages 589-620.
    24. Robert Axtell, 2007. "What economic agents do: How cognition and interaction lead to emergence and complexity," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 20(2), pages 105-122, September.
    25. Duffy, John, 2006. "Agent-Based Models and Human Subject Experiments," Handbook of Computational Economics,in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 19, pages 949-1011 Elsevier.
    26. Schelling, Thomas C, 1969. "Models of Segregation," American Economic Review, American Economic Association, vol. 59(2), pages 488-493, May.
    27. Russo, Alberto & Catalano, Michele & Gaffeo, Edoardo & Gallegati, Mauro & Napoletano, Mauro, 2007. "Industrial dynamics, fiscal policy and R&D: Evidence from a computational experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 64(3-4), pages 426-447.
    28. Ball, Laurence & Mankiw, N. Gregory, 1994. "A sticky-price manifesto," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 41(1), pages 127-151, December.
    29. 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;Society for Economic Science with Heterogeneous Interacting Agents, vol. 1(1), pages 5-19, May.
    30. Paul Grauwe, 2011. "Animal spirits and monetary policy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 47(2), pages 423-457, June.
    31. Giovanni Dosi & Giorgio Fagiolo & Andrea Roventini, 2008. "The microfoundations of business cycles: an evolutionary, multi-agent model," Journal of Evolutionary Economics, Springer, vol. 18(3), pages 413-432, August.
    32. Finn E. Kydland & Edward C. Prescott, 1990. "Business cycles: real facts and a monetary myth," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-18.
    33. Domenico Gatti & Edoardo Gaffeo & Mauro Gallegati, 2010. "Complex agent-based macroeconomics: a manifesto for a new paradigm," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 5(2), pages 111-135, December.
    34. Haber Gottfried, 2008. "Monetary and Fiscal Policy Analysis With an Agent-Based Macroeconomic Model," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 228(2-3), pages 276-295, April.
    35. Alan Kirman, 2006. "Demand Theory and General Equilibrium: From Explanation to Introspection, a Journey down the Wrong Road," History of Political Economy, Duke University Press, vol. 38(5), pages 246-280, Supplemen.
    36. Carl E. Walsh, 2010. "Monetary Theory and Policy, Third Edition," MIT Press Books, The MIT Press, edition 3, volume 1, number 0262013770, January.
    37. Janet L. Yellen, 2007. "Implications of behavioral economics for monetary policy," Speech 41, Federal Reserve Bank of San Francisco.
    38. LeBaron, Blake, 2006. "Agent-based Computational Finance," Handbook of Computational Economics,in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 24, pages 1187-1233 Elsevier.
    39. Philip Arestis, 2009. "New Consensus Macroeconomics: A Critical Appraisal," Economics Working Paper Archive wp_564, Levy Economics Institute.
    40. James Peery Cover, 1992. "Asymmetric Effects of Positive and Negative Money-Supply Shocks," The Quarterly Journal of Economics, Oxford University Press, vol. 107(4), pages 1261-1282.
    41. Nicholas S. Souleles, 1999. "The Response of Household Consumption to Income Tax Refunds," American Economic Review, American Economic Association, vol. 89(4), pages 947-958, September.
    42. Judd, John P & Trehan, Bharat, 1995. "The Cyclical Behavior of Prices: Interpreting the Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 789-797, August.
    43. Hommes, Cars H., 2006. "Heterogeneous Agent Models in Economics and Finance," Handbook of Computational Economics,in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 23, pages 1109-1186 Elsevier.
    44. Arthur, W. Brian, 2006. "Out-of-Equilibrium Economics and Agent-Based Modeling," Handbook of Computational Economics,in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 32, pages 1551-1564 Elsevier.
    45. George T. McCandless & Warren E. Weber, 1995. "Some monetary facts," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 2-11.
    46. Robert E. Lucas Jr., 2003. "Macroeconomic Priorities," American Economic Review, American Economic Association, vol. 93(1), pages 1-14, March.
    47. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, Oxford University Press, vol. 123(4), pages 1415-1464.
    48. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Agent-based macroeconomics; Complex adaptive systems; Microfoundations; Emergence; Complexity;

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:86:y:2013:i:c:p:102-120. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/jebo .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.