Agent based-stock flow consistent macroeconomics: Towards a benchmark model

Abstract

a b s t r a c tThe paper moves from a discussion of the challenges posed by the crisis to standard macroeconomics and the solutions adopted within the DSGE community. Although several recent improvements have enhanced the realism of standard models, we argue that major drawbacks still undermine their reliability. In particular, DSGE models still fail to recognize the complex adaptive nature of economic systems, and the implications of money endogeneity. The paper argues that a coherent and exhaustive representation of the inter-linkages between the real and financial sides of the economy should be a pivotal feature of every macroeconomic model and proposes a macroeconomic framework based on the combination of the Agent Based and Stock Flow Consistent approaches. The papers aims at contributing to the nascent AB-SFC literature under two fundamental respects: first, we develop a fully decentralized AB-SFC model with several innovative features, and we thoroughly validate it in order to check whether the model is a good candidate for policy analysis applications. Results suggest that the properties of the model match many empirical regularities, ranking among the best performers in the related literature, and that these properties are robust across different parameterizations. Second, the paper has also a methodological purpose in that we try to provide a set or rules and tools to build, calibrate, validate, and display AB-SFC models.& 2016 Elsevier B.V. All rights reserved. Is the economic crisis a crisis for macroeconomics?More than eight years since the onset of the global financial crisis we are still assessing how the crisis should change our view about macroeconomics. The crisis cast serious doubts on the plausibility of standard macroeconomic models -in particular of dynamic stochastic general equilibrium (DSGE) models -and their ability to provide effective policy advices to prevent the occurrence of large-scale economic turmoils, and to tackle their consequences.In a nutshell, the anatomy of the standard DSGE model presents an economy composed of different types of representative agents, such as households and firms, maximizing in a infinite lifetime horizon an objective function subject to an inter-temporal budget constraint. The first order conditions yield a fully state-contingent plan for the representative agents

Agent-Based Model Calibration Using Machine Learning Surrogates

“…As stated by Chen et al (2012), 5 See e.g. Dosi et al (2010Dosi et al ( , 2013Dosi et al ( , 2015; Caiani et al (2016); Assenza et al (2015) and Dawid et al (2014a) on business cycle dynamics, Lamperti et al (2017) on growth, green transitions and climate change, Dawid et al (2014b) on regional convergence and Leal et al (2014) on financial markets. The surveys in Roventini (2012, 2017) provides a more exhaustive list.…”

Bubbles, Crashes, and the Financial Cycle: The Impact of Banking Regulation on Deep Recessions

“…For example, Le Heron and Mouakil (2008) describe a SFC model combining the balance sheet and the credit channel in a consistent way, and also Caiani et al (2016) develop an agent-based stock-flow consistent (AB-SFC) model that is quite similar in spirit to the model we present below.…”

Agent-Based Macroeconomics and Classical Political Economy: Some Italian Roots

“…16 Finally, a new contribution (Caiani et al, 2016) has combined the agent-based and stock-flow-consistent approaches.…”