Beyond DSGE Models: Toward an Empirically Based Macroeconomics

Colander, David; Howitt, Peter; Kirman, Alan; Leijonhufvud, Axel; Mehrling, Perry

doi:10.4337/9781786435903.00024

Cited by 76 publications

(96 citation statements)

References 2 publications

(2 reference statements)

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Rationality will be introduced by assuming a willingness to learn from mistakes and therefore a willingness to switch between different heuristics. In making these choices we follow the road taken by an increasing number of macroeconomists, which have developed "agent-based models" and "behavioral macroeconomic models" (Tesfatsion 2001;Tesfatsion and Judd 2006;Colander et al 2008;Farmer and Foley 2009;Gatti et al 2011;Westerhoff 2012;De Grauwe 2012;Hommes and Lustenhouwer 2016).…”

Section: Model Choicementioning

confidence: 99%

The International Synchronisation of Business Cycles: the Role of Animal Spirits

2017

Open Econ Rev

View full text Add to dashboard Cite

Business cycles among industrial countries are highly correlated. We develop a two-country behavioral macroeconomic model where the synchronization of the business cycle is produced endogenously. The main channel of synchronization occurs through a propagation of "animal spirits", i.e. waves of optimism and pessimism that become correlated internationally. We find that this propagation occurs with relatively low levels of trade integration. We do not need a correlation of exogenous shocks to generate synchronization. We also empirically test the main predictions of the model.

show abstract

Section: Model Choicementioning

confidence: 99%

The International Synchronisation of Business Cycles: the Role of Animal Spirits

2017

Open Econ Rev

View full text Add to dashboard Cite

show abstract

“…If this does not hold-and in general, it will not-then the "representative" individual is being used to provide the stability and the uniqueness of equilibria which are not guaranteed by the underlying model. 3 In fact, it is contradictory to begin with a single representative agent and then to envisage different individual actions which lead the economy back to equilibrium.…”

Section: A Basic Questionmentioning

confidence: 99%

Whom or What Does the Representative Individual Represent?

Kirman

1992

Journal of Economic Perspectives

1,261

589

View full text Add to dashboard Cite

A modern economy presents a picture of millions of people, either as individuals or organized into groups and firms, each pursuing their own disparate interests in a rather limited part of the environment. Somehow, these varied individual activities are more or less coordinated and some relative order emerges. Economists commonly explain that this is due to Adam Smith's "invisible hand," and that despite the conflicting interests of individuals, the result of the pursuit of their selfish ends is socially satisfactory. The market provides the mechanism which links and coordinates all the activities being pursued by individuals.Paradoxically, the sort of macroeconomic models which claim to give a picture of economic reality (albeit a simplified picture) have almost no activity which needs such coordination. This is because typically they assume that the choices of all the diverse agents in one sector-consumers for example-can be considered as the choices of one "representative" standard utility maximizing individual whose choices coincide with the aggregate choices of the heterogeneous individuals.My basic point in this paper is to explain that this reduction of the behavior of a group of heterogeneous agents even if they are all themselves utility maximizers,is not simply an analytical convenience as often explained, but is both unjustified and leads to conclusions which are usually misleading and often wrong. Why is this? First, such models are particularly ill-suited to studying macroeco-

show abstract

“…The cascade of events that disturbed the recent course of the world economy has very little to do with the scenario prescribed by any of the market theories (Lux and Westerhoff 2009). In fact, as stated in Colander et al (2008), even after the reality of the crisis was recognized, there was little that the economics profession had to say about the expected outlook and/or about the recommended measures: most of the questions fell outside the range addressable in the traditional economic conceptual framework (Leijonhufvud 2009). In order to understand and control the evolution of mass phenomena such as the current crisis, one has to give up the concept of linear causality chains, which associates to each effect a cause.…”

Section: Introductionmentioning

confidence: 98%

When the collective acts on its components: economic crisis autocatalytic percolation

Cantono

Solomon

2010

New J. Phys.

View full text Add to dashboard Cite

Agent-based models have improved the standards for empirical support and validation criteria in social, biological, cognitive and human sciences. Yet, the inclusion, in these models, of vertical interactions between various aggregation levels remains a challenge. We study analytically, numerically and by simulation the generic consequences of interactions between the collective and its individual components: the appearance of an autocatalytic loop between the dynamics of the collective and its components; the system, which is dominated by a limited number of factors amplified by this collective↔individuals autocatalytic loop; the microscopic features, which are not involved in the autocatalytic loop and are irrelevant at the systemic level; and how the above clarify the interplay between macroscopic predictable features and the ones dependent on random unpredictable individual events. Using the social and market percolation framework, we study the dramatic effects of the collective↔individuals autocatalytic loop on economic crisis propagation: the percolation transition becomes discontinuous; there are a few relevant regions and regimes corresponding to a quite diverse range of response policy options; there are stability ranges where appropriate policies can help to avoid macroscopic crisis percolation; and beyond those regions the systemic crisis might become unstoppable.

show abstract

Beyond DSGE Models: Toward an Empirically Based Macroeconomics

Cited by 76 publications

References 2 publications

The International Synchronisation of Business Cycles: the Role of Animal Spirits

The International Synchronisation of Business Cycles: the Role of Animal Spirits

Whom or What Does the Representative Individual Represent?

When the collective acts on its components: economic crisis autocatalytic percolation

Contact Info

Product

Resources

About