Agent–Based Keynesian Macroeconomics - An Evolutionary Model Embedded in an Agent–Based Computer Simulation
Subject of the present study is the agent-based computer simulation of Agent Island. Agent Island is a macroeconomic model, which belongs to the field of monetary theory. Agent-based modeling is an innovative tool that made much progress in other scientific fields like medicine or logistics. In economics this tool is quite new, and in monetary theory to this date virtual no agent-based simulation model has been developed. It is therefore the topic of this study to close this gap to some extend. Hence, the model integrates in a straightforward way next to the common private sectors (i.e. households, consumer goods firms and capital goods firms)and as an innovation a banking system, a central bank and a monetary circuit. Thereby, the central bank controls the business cycle via an interest rate policy; the according mechanism builds on the seminal idea of Knut Wicksell (natural rate of interest vs. money rate of interest). In addition, the model contains also many Keynesian features and a flow-of-funds accounting system in the tradition of Wolfgang Stützel. Importantly, one objective of the study is the validation of Agent Island, which means that the individual agents (i.e. their rules, variables and parameters) are adjusted in such a way that on the aggregate level certain phenomena emerge. The crucial aspect of the modeling and the validation is therefore the relation between the micro and macro level: Every phenomenon on the aggregate level (e.g. some stylized facts of the business cycle, the monetary transmission mechanism, the Phillips curve relationship, the Keynesian paradox of thrift or the course of the business cycle) emerges out of individual actions and interactions of the many thousand agents on Agent Island. In contrast to models comprising a representative agent, we do not apply a modeling on the aggregate level; and in contrast to orthodox GE models, true interaction between heterogeneous agents takes place (e.g. by face-to-face-trading).
|Date of creation:||Sep 2008|
|Date of revision:||Oct 2009|
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- Leigh Tesfatsion, 2006.
"Agent-Based Computational Economics: A Constructive Approach to Economic Theory,"
Computing in Economics and Finance 2006
527, Society for Computational Economics.
- Tesfatsion, Leigh, 2006. "Agent-Based Computational Economics: A Constructive Approach to Economic Theory," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 16, pages 831-880 Elsevier.
- Tesfatsion, Leigh, 2006. "Agent-Based Computational Economics: A Constructive Approach to Economic Theory," Staff General Research Papers 12514, Iowa State University, Department of Economics.
- 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.
- 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.
- Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, June.
- Leijonhufvud, Axel, 2006. "Agent-Based Macro," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 36, pages 1625-1637 Elsevier.
- Giovanni Dosi & Giorgio Fagiolo & Andrea Roventini, 2006. "An Evolutionary Model of Endogenous Business Cycles," Computational Economics, Society for Computational Economics, vol. 27(1), pages 3-34, February.
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