Agent-based financial markets and New Keynesian macroeconomics: a synthesis

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may University of Kiel University of MannheimHans-Werner Wohltmann * * University of KielNovember 4, 2010 AbstractWe combine a simple agent-based model of financial markets with a standard New Keynesian macroeconomic model via two straightforward channels. The result is a macroeconomic model that allows for the endogenous development of stock price bubbles. Even with such a simplistic comprehensive model, we can show that the behavioral foundations of the stock market exert important influence on the macroeconomy, e.g. they change the impulse-response functions of macroeconomic variables significantly. We also analyze financial market transaction taxes as well as asset price bubble deflating monetary policy, and find that both can be used to reduce volatility and distortion of the macroeconomic aggregates.JEL classification: E0, E52, G12, G18

Optimal monetary policy in a new Keynesian model with animal spirits and financial markets

“…Typical assumptions for possible channels which affect the real sector from within the financial one are, (1) the existence of wealth effects (Kontonikas and Montagnoli (2006), Bask (2011), Westerhoff (2012, Naimzada and Pireddu (2013)), (2) a collateral based cost effect (Lengnick and Wohltmann (2013)) or (3) a balance-sheet based leverage targeting effect (Scheffknecht and Geiger (2011)). Typical examples for channels going in the opposite direction are (1) a misperception effect (Kontonikas and Montagnoli (2006), Westerhoff (2012), DeGrauwe and Kaltwasser (2012), Lengnick and Wohltmann (2013), Naimzada and Pireddu (2013)), (2) a negative dependence on the (real) interest rate (Kontonikas and Montagnoli (2006)), or (3) a mixture of both (Bask (2011)).…”

“…Typical examples for channels going in the opposite direction are (1) a misperception effect (Kontonikas and Montagnoli (2006), Westerhoff (2012), DeGrauwe and Kaltwasser (2012), Lengnick and Wohltmann (2013), Naimzada and Pireddu (2013)), (2) a negative dependence on the (real) interest rate (Kontonikas and Montagnoli (2006)), or (3) a mixture of both (Bask (2011)). …”

“…7 It is assumed that trading does not take place on weekends. 8 Lengnick and Wohltmann (2013), section 2. 9 Compare literature overview in section 1.…”

“…A first approach to integrate NKM of the DeGrauwe type with ACE financial markets has been proposed by Lengnick and Wohltmann (2013). The authors put a Westerhoff (2008) model alongside the DeGrauwe NKM and introduce two different interaction channels.…”

Complex agent-based models: application of a constructivism in the economic research

“…For instance, Lengnick and Wohltmann [27] combine a simple agent-based model of financial markets and a New Keynesian macroeconomic model with bounded rationality via two straightforward channels. They bring a macroeconomic model which enables the endogenous development of business cycles and stock price bubbles.…”