A Critical Guide to Empirical Validation of Agent-Based Models in Economics: Methodologies, Procedures, and Open Problems

Fagiolo, Giorgio; Moneta, Alessio; Windrum, Paul

doi:10.1007/s10614-007-9104-4

Cited by 223 publications

(139 citation statements)

References 49 publications

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“…The figure shows that indeed only the ratio R = η + /η − is relevant, the actual values of η ± only change the time scale over which the production fluctuates. Moreover, the phase diagram is almost independent of N F , which confirms that we are effectively in a limit where the number of firms can be considered to be very large 14 . Interestingly, for finite values of Θ, the phase diagram is more complex and shown in Fig.…”

Section: B Numerical Results and Phase Diagramsupporting

confidence: 71%

Tipping points in macroeconomic agent-based models

Gualdi

Tarzia

Zamponi

et al. 2015

Journal of Economic Dynamics and Control

145

194

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The aim of this work is to explore the possible types of phenomena that simple macroeconomic Agent-Based models (ABM) can reproduce. We propose a methodology, inspired by statistical physics, that characterizes a model through its "phase diagram" in the space of parameters. Our first motivation is to understand the large macro-economic fluctuations observed in the "Mark I" ABM devised by D. Delli Gatti and collaborators. In this regard, our major finding is the generic existence of a phase transition between a "good economy" where unemployment is low, and a "bad economy" where unemployment is high. We then introduce a simpler framework that allows us to show that this transition is robust against many modifications of the model, and is generically induced by an asymmetry between the rate of hiring and the rate of firing of the firms. The unemployment level remains small until a tipping point, beyond which the economy suddenly collapses. If the parameters are such that the system is close to this transition, any small fluctuation is amplified as the system jumps between the two equilibria. We have explored several natural extensions of the model. One is to introduce a bankruptcy threshold, limiting the firms maximum level of debt-tosales ratio. This leads to a rich phase diagram with, in particular, a region where acute endogenous crises occur, during which the unemployment rate shoots up before the economy can recover. We also introduce simple wage policies. This leads to inflation (in the "good" phase) or deflation (in the "bad" phase), but leaves the overall phase diagram of the model essentially unchanged. We have also explored the effect of simple monetary policies that attempt to contain rising unemployment and defang crises. We end the paper with general comments on the usefulness of ABMs to model macroeconomic phenomena, in particular in view of the time needed to reach a steady state that raises the issue of ergodicity in these models.It is human nature to think wisely and to act absurdly

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Section: B Numerical Results and Phase Diagramsupporting

confidence: 71%

Tipping points in macroeconomic agent-based models

Gualdi

Tarzia

Zamponi

et al. 2015

Journal of Economic Dynamics and Control

145

194

View full text Add to dashboard Cite

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“…Nevertheless, most of those studies still have not incorporated developing countries' characteristics in their analyses (Hsu, 2012;Espinoza et al, 2017). Another well-known model for systems approach is ABM, which is a dynamic model consisting of agents with an ability for learning, adaptive capacity, heterogeneity, autonomy, local interaction, bounded rationality, and non-equilibrium dynamic characteristics (Fagiolo et al, 2007;Ringler et al, 2016). ABM also could possess bottom-up and top-down features at the same time (Ehlen and Scholand, 2005;Gerst et al, 2013).…”

Section: System Thinking Approachmentioning

confidence: 99%

Selecting Tools for Renewable Energy Analysis in Developing Countries: An Expanded Review

et al. 2017

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Renewable energy planners in developing countries should be cautious in using analytical tools formulated in developed countries. Traditional energy consumption, economic and demography transitions, high-income inequality, and informal economy are some characteristics of developing countries that may contradict the assumptions of mainstream, widely used analytical tools. In this study, we synthesize the debate in previous review studies on energy models for developing countries and then extend the scope of the previous studies by highlighting emerging methods of system thinking, life cycle thinking, and decision support analysis. We then discuss how these tools have been used for renewable energy analysis in developing countries and found out that not all studies are aware of the emerging critical issues in developing countries. We offer here a guidance to select the most appropriate analytical tool, mainly when dealing with energy modeling and analysis for developing countries. We also suggest potential future improvements to the analytical tool for renewable energy modeling and analysis in the developing countries.

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“…Empirical validation of bioeconomic microsimulation models is commonly done by comparing the model output (endogenous variables) with the corresponding observed values (Fagiolo et al 2007). Our model validation followed the methods described in , Carauta et al (2016a) and Carauta et al (2016b).…”

Section: Model Validation and Simulation Experiments Model Validationmentioning

confidence: 99%

Can preferential credit programs speed up the adoption of low-carbon agricultural systems in Mato Grosso, Brazil? Results from bioeconomic microsimulation

et al. 2017

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The need to balance agricultural production and environmental protection shifted the focus of Brazilian land-use policy toward sustainable agriculture. In 2010, Brazil established preferential credit lines to finance investments into low-carbon integrated agricultural systems of crop, livestock and forestry. This article presents a simulation-based empirical assessment of integrated system adoption in the state of Mato Grosso, where highly mechanized soybean-cotton and soybean-maize doublecrop systems currently prevail. We employ bioeconomic modeling to explicitly capture the heterogeneity of farmlevel costs and benefits of adoption. By parameterizing and validating our simulations with both empirical and experimental data, we evaluate the effectiveness of the ABC Integration credit through indicators such as land-use change, adoption rates and budgetary costs of credit provision. Alternative scenarios reveal that specific credit conditions might speed up the diffusion of low-carbon agricultural systems in Mato Grosso.

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A Critical Guide to Empirical Validation of Agent-Based Models in Economics: Methodologies, Procedures, and Open Problems

Abstract: Methodology, Agent-based computational economics, Simulation models, Empirical validation, Calibration, History-friendly modeling, B41, B52, C63,

Cited by 223 publications

References 49 publications

Tipping points in macroeconomic agent-based models

Tipping points in macroeconomic agent-based models

Selecting Tools for Renewable Energy Analysis in Developing Countries: An Expanded Review

Can preferential credit programs speed up the adoption of low-carbon agricultural systems in Mato Grosso, Brazil? Results from bioeconomic microsimulation

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