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Monetary Policy and Dark Corners in a stylized Agent-Based Model


  • Stanislao Gualdi
  • Marco Tarzia
  • Francesco Zamponi
  • Jean-Philippe Bouchaud


We extend in a minimal way the stylized model introduced in in "Tipping Points in Macroeconomic Agent Based Models" [JEDC 50, 29-61 (2015)], with the aim of investigating the role and efficacy of monetary policy of a `Central Bank' that sets the interest rate such as to steer the economy towards a prescribed inflation and employment level. Our major finding is that provided its policy is not too aggressive (in a sense detailed in the paper) the Central Bank is successful in achieving its goals. However, the existence of different equilibrium states of the economy, separated by phase boundaries (or "dark corners"), can cause the monetary policy itself to trigger instabilities and be counter-productive. In other words, the Central Bank must navigate in a narrow window: too little is not enough, too much leads to instabilities and wildly oscillating economies. This conclusion strongly contrasts with the prediction of DSGE models.

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  • Stanislao Gualdi & Marco Tarzia & Francesco Zamponi & Jean-Philippe Bouchaud, 2015. "Monetary Policy and Dark Corners in a stylized Agent-Based Model," Papers 1501.00434,, revised Jan 2016.
  • Handle: RePEc:arx:papers:1501.00434

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    1. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    2. Mitchell, Olivia S. & Smetters, Kent (ed.), 2013. "The Market for Retirement Financial Advice," OUP Catalogue, Oxford University Press, number 9780199683772.
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    Cited by:

    1. Schasfoort, Joeri & Godin, Antoine & Bezemer, Dirk & Caiani, Alessandro & Kinsella, Stephen, 2017. "Monetary Policy Transmission in a Macroeconomic Agent-Based Model," Research Report 17010-GEM, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    2. repec:zbw:ifweej:20187 is not listed on IDEAS

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