taming macroeconomic instability monetary and macro prudential policy interactions in an agent based model abstract we develop an agent based model to study the macroeconomic impact of alternative macro prudential regulations and their possible interactions with different monetary policy rules the aim is to shed light on the most appropriate policy mix to achieve the resilience of the banking sector and foster macroeconomic stability simulation results show that a triple mandate taylor rule focused on output gap inflation and credit growth and a basel iii prudential regulation is the best policy mix to improve the stability of the banking sector and smooth output fluctuations moreover we consider the different levers of basel iii and their combinations we find that minimum capital requirements and counter cyclical capital buffers allow to achieve results close to the basel iii first best with a much more simplified regulatory framework finally the components of basel iii are non additive the inclusion of an additional lever does not always improve the performance of the macro prudential regulation

tipping points in macroeconomic agent based models abstract the aim of this work is to explore the possible types of phenomena that simple macroeconomic agent based models abms 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 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 to sales 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

the future of macroeconomics macro theory and models at the bank of england abstract the adoption as policy models by central banks of representative agent new keynesian dynamic stochastic general equilibrium models has been widely criticised including for their simplistic micro foundations at the bank of england the previous generation of policy models is seen in its 1999 medium term macro model mtmm instead of improving that model to correct its considerable flaws many shared by other non dsge policy models such as the federal reserve s frb us it was replaced in 2004 by the dsge based beqm though this clearly failed during and after the global financial crisis it was replaced in 2011 by the dsge compass complemented by a suite of models we provide a general critique of dsge models for explaining forecasting and policy analyses at central banks and suggest new directions for improving current empirical macroeconomic models based on empirical modelling broadly consistent with better theory rather than seeking to impose simplistic and unrealistic theory

distortionary taxes and the provision of public goods economists have long been concerned with finding an efficient level of public expenditure the classic statement of the problem was given by paul samuelson 1954 an optimal level of expenditure is where the sum of the marginal rates of substitution between the public good and a reference good equals the marginal rate of transformation between the public good and the reference good mrs mrt however samuelson s formula assumes that all of the revenue needed to finance public goods can be raised with lump sum taxes since this is not generally possible the formula must be modified to account for the distortionary effects of the tax system an appropriate modification is to multiply the cost side of the equation by a term that is commonly called the marginal cost of public funds mcf in the case of samuelson s formula where government is entirely financed with lump sum taxes the mcf would be exactly 1 0 in the traditional view of economists distortionary taxes cause the mcf to be greater than one thus raising the cost of providing public goods in this paper we discuss some cases where the mcf may be less than one we will illustrate this possibility using numerical examples for labor taxes

an interdisciplinary model for macroeconomics macroeconomic modelling has been under intense scrutiny since the great financial crisis when serious shortcomings were exposed in the methodology used to understand the economy as a whole criticism has been levelled at the assumptions employed in the dominant models particularly that economic agents are homogeneous and optimizing and that the economy is equilibrating this paper seeks to explore an interdisciplinary approach to macroeconomic modelling with techniques drawn from other natural and social sciences specifically it discusses agent based modelling which is used across a wide range of disciplines as an example of such a technique agent based models are complementary to existing approaches and are suited to answering macroeconomic questions where complexity heterogeneity networks and heuristics play an important role

management of a transboundary wildlife population a self enforcing cooperative agreement with renegotiation and variable transfer payments abstract this paper characterizes a dynamic contract that allows renegotiation and variable transfer payments vtp between owners of two independently harvested ecologically dependent mammal populations the decision environment is modeled as a two person differential game we develop a recursive efficiency criterion that forms the basis for determining the size of the vtp which makes the bargaining contract renegotiation proof and self enforcing we further show that the vtp is just as pareto efficient as a lump sum or fixed annual transfer payment a nuisance wildlife species management forms a basis for numerical illustration

fiscal and monetary policies in complex evolving economies what is the most appropriate combination of fiscal and monetary policies in economies subject to banking crises and deep recessions we study this issue using an agent based model that is able to reproduce a wide array of macro and micro empirical regularities simulation results suggest that policy mixes associating unconstrained counter cyclical fiscal policy and monetary policy targeting employment is required to stabilise the economy we also show that discipline guided fiscal rules can be self defeating as they depress the economy without improving public finances finally we find that the effects of monetary and fiscal policies become sharper as the level of income inequality increases

the control of invasive species on private property with neighbor to neighbor spillovers invasive pests cross property boundaries property managers may have private incentives to control invasive species despite not having sufficient incentive to fully internalize the external costs of their role in spreading the invasion each property manager has a right to future use of his own property but his property may abut others properties enabling spread of an invasive species the incentives for a foresighted property manager to control invasive species have received little attention we consider the efforts of a foresighted property manager who has rights to future use of a property and has the ability to engage in repeated discrete control activities we find that higher rates of dispersal associated with proximity to neighboring properties reduce the private incentives for control controlling species at one location provides incentives to control at a neighboring location control at neighboring locations are strategic complements and coupled with spatial heterogeneity lead to a weaker link public good problem in which each property owner is unable to fully appropriate the benefits of his own control activity future use rights and private costs suggest that there is scope for a series of coase like exchanges to internalize much of the costs associated with species invasion pigouvian taxes on invasive species potentially have qualitatively perverse behavioral effects a tax with a strong income effect e g failure of effective revenue recycling can reduce the value of property assets and diminish the incentive to manage insects on one s own property

a financial macro network approach to climate policy evaluation abstract existing approaches to assess the economic impact of climate policies tend to overlook the financial sector and to focus only on direct effects of policies on the specific institutional sector they target neglecting possible feedbacks between sectors thus underestimating the overall policy effect to fill in this gap we develop a methodology based on financial networks which allows for analyzing the transmission throughout the economy of positive or negative shocks induced by the introduction of specific climate policies we apply the methodology to empirical data of the euro area to identify the feedback loops between the financial sector and the real economy both through direct and indirect chains of financial exposures across multiple financial instruments by focusing on climate policy induced shocks that affect directly either the banking sector or non financial firms we analyze the reinforcing feedback loops that could amplify the effects of shocks on the financial sector and then cascade on the real economy our analysis helps to understand the conditions for virtuous or vicious cycles to arise in the climate finance nexus and to provide a comprehensive assessment of the economic impact of climate policies

specification of spatial dynamic externalities and implications for strategic behavior in disease control we propose a novel distance and density dependent specification of externalities that captures spatial dynamics within and between neighboring land parcels we use this specification to model the short and long distance diffusion and control of an infectious disease in two privately owned and ecologically connected vineyards using computational experiments to generate individual and aggregate payoffs our results suggest that ignoring the within parcel spatial dynamics in the model may overestimate the social cost of an externality we find that increased resource value heterogeneity defined as the difference in grape prices received by the two vineyards has a detrimental impact on aggregate payoffs

inequality leverage and crises the paper studies how high leverage and crises can arise as a result of changes in the income distribution empirically the periods 1920 1929 and 1983 2007 both exhibited a large increase in the income share of the rich a large increase in leverage for the remainder and an eventual financial and real crisis the paper presents a theoretical model where these features arise endogenously as a result of a shift in bargaining powers over incomes a financial crisis can reduce leverage if it is very large and not accompanied by a real contraction but restoration of the lower income group s bargaining power is more effective

emergence of new economics energy transition models a review abstract well known academic and non academic institutions call for a new approach in economics able to capture features of modern economies including but not limited to complexity non equilibrium and uncertainty in this paper we provide a systematic review of ecological macroeconomic models that are suitable for the investigation of low carbon energy transitions and assess them based on the features considered desirable for a new approach in economics we draw two main conclusions firstly the knowledge base and structure of these existing ecological macroeconomic models are relevant alongside other types of models for the creation of a new approach in economics secondly the reviewed models are policy relevant especially in the context of the complexity and urgency of rapid energy transitions where increasingly policymakers require economic models able to capture real world characteristics however further improvements are needed to these models and future research should focus on i assuring comparability of models results and their policy insights ii incorporation of the relationships between macroeconomics finance and sustainability and iii the institutionalization of a new approach in economics

animal spirits heterogeneous expectations and the amplification and duration of crises we introduce a simple equilibrium model of a market for loans households lend to firms and form expectations about their loan default probability under heterogeneous expectations with switching between forecasting strategies driven by reinforcement learning even a small fraction of pessimistic traders has a large aggregate effect causing a heterogeneous expectations risk premium i e significantly higher contract rates for loans and significantly lower output our stylized model illustrates how animal spirits and heterogeneous expectations may lead to aconfidence loss and to financial instability amplifying the magnitude of economic crises and slowing down recovery

market efficiency a theoretical distinction and so what with the aid of some simplifying assumptions the capital asset pricing model comes to dramatic conclusions about practical matters such as how to choose an investment portfolio and how to value financial assets as illustrated in this article when one particular clearly unrealistic capm assumption is replaced by a more real world version some of the dramatic practical conclusions of capm no longer follow this result has implications for financial practice research and pedagogy

structural stochastic volatility in asset pricing dynamics estimation and model contest abstract in the framework of small scale agent based financial market models the paper starts out from the concept of structural stochastic volatility which derives from different noise levels in the demand of fundamentalists and chartists and the time varying market shares of the two groups it advances several different specifications of the endogenous switching between the trading strategies and then estimates these models by the method of simulated moments msms where the choice of the moments reflects the basic stylized facts of the daily returns of a stock market index in addition to the standard version of msm with a quadratic loss function we also take into account how often a great number of monte carlo simulation runs happen to yield moments that are all contained within their empirical confidence intervals the model contest along these lines reveals a strong role for a tamed herding component the quantitative performance of the winner model is so good that it may provide a standard for future research

cooperative and non cooperative exploitation of the arcto norwegian cod stock a two agent model for the exploitation of the arcto norwegian cod stock is developed to investigate the economic benefits that can be realized from the resource and the effect of exploitation on stock sustainability under cooperation and non cooperation the two agents are identified in this study as a trawl fishery versus a coastal fishery unlike in munro 1979 where conflicts in the management strategies of agents arise from differences in the perceptions of the discount factor fishing effort costs and consumer preferences here conflicts arise mainly from the differences in fishing gear and grounds and the age group of cod targeted by the two agents using a game theoretic framework we show that given available data the optimum optimorum is obtained under cooperation with side payments and no predetermined harvest shares in which case the coastal fishery buys out the trawl fishery however sensitivity analysis shows that if the price premium assumed for mature cod is taken away the trawl fishery takes over as the producer of the optimum optimorum

are output growth rate distributions fat tailed some evidence from oecd countries this work explores some distributional properties of aggregate output growth rate time series we show that in the majority of oecd countries output growth rate distributions are well approximated by symmetric exponential power densities with tails much fatter than those of a gaussian fat tails robustly emerge in output growth rates independently of i the way we measure aggregate output ii the family of densities employed in the estimation iii the length of time lags used to compute growth rates we also show that fat tails still characterize output growth rate distributions even after one washes away outliers autocorrelation and heteroscedasticity

getting at systemic risk via an agent based model of the housing market systemic risk must include the housing market though economists have not generally focused on it we begin construction of an agent based model of the housing market with individual data from washington dc twenty years of success with agent based models of mortgage prepayments give us hope that such a model could be useful preliminary analysis suggests that the housing boom and bust of 1997 2007 was due in large part to changes in leverage rather than interest rates

wealth effects and macroeconomic dynamics the effect of wealth on consumption is an issue of long standing interest to economists conventional wisdom suggests that fluctuations in household wealth have driven major swings in economic activity both in the united states and abroad this paper considers the so called consumption wealth effects there is an extensive existing literature on wealth effects that has yielded some insights for example research has documented the relationship between aggregate household wealth and aggregate consumption over time and a large number of household level studies suggest that wealth effects are larger for households facing credit constraints however there are also many unresolved issues regarding the influence of household wealth on consumption we review the most important of these issues and argue that there is a need for much more research in these areas as well as better data sources for conducting such analysis

macroeconomies as constructively rational games real world decision makers are forced to be locally constructive that is their decisions are necessarily constrained by their interaction networks information beliefs and physical states this study transforms an otherwise standard dynamic macroeconomic model into an open ended dynamic game by requiring consumers and firms with intertemporal utility and profit objectives to be locally constructive tested locally constructive decision processes for the consumers and firms range from simple reactive reinforcement learning to adaptive dynamic programming adp computational experiments are used to explore macroeconomic performance under alternative decision process combinations relative to a social planner benchmark solution a key finding is that simpler decision processes can outperform more sophisticated decision processes such as adp however memory length permitting some degree of adaptive foresight is critical for good performance

explaining the distribution of firm growth rates empirical analyses on aggregated datasets have revealed a common exponential behavior in the shape of the probability density of corporate growth rates we present clear cut evidence on this topic using disaggregated data we explain the observed regularities proposing a model in which firms ability to take up new business opportunities increases with the number of opportunities already exploited a theoretical result is presented for the limiting case in which the number of firms and opportunities go to infinity moreover using simulations we show that even in a small industry the agreement with asymptotic results is almost complete

winter is possibly not coming mitigating financial instability in an agent based model with interbank market abstract we develop a macroeconomic agent based model to study how financial instability can emerge from the co evolution of interbank and credit markets and the policy responses to mitigate its impact on the real economy the model is populated by heterogenous firms consumers and banks that locally interact in different markets in particular banks provide credit to firms according to a basel ii or iii macro prudential frameworks and manage their liquidity in the interbank market the central bank performs monetary policy according to different types of taylor rules we find that the model endogenously generates market freezes in the interbank market which interact with the financial accelerator possibly leading to firm bankruptcies banking crises and the emergence of deep downturns this requires the timely intervention of the central bank as a liquidity lender of last resort moreover we find that the joint adoption of a three mandate taylor rule tackling credit growth and the basel iii macro prudential framework is the best policy mix to stabilize financial and real economic dynamics however as the liquidity coverage ratio spurs financial instability by increasing the pro cyclicality of banks liquid reserves a new counter cyclical liquidity buffer should be added to basel iii to improve its performance further finally we find that the central bank can also dampen financial instability by employing a new unconventional monetary policy tool involving active management of the interest rate corridor in the interbank market

how does the diversity of investors beliefs affect stock price informativeness abstracta growing number of studies have investigated the role of stock prices in aggregating private information and guiding resource reallocation however this article may be the first attempt to study how the diversity of beliefs affects stock price informativeness the framework of the noisy rational expectations model shows that stock informativeness is determined by both the precision and use of private information in trading if private beliefs about the value are highly diverse the aggregate average opinion revealed in a stock s price will be more accurate and thus more informative as the price becomes more informative however individual investors will rely less on their private information when this occurs less private information will be absorbed in price which in turn reduces price informativeness our model shows that the relationship between belief diversity and price informativeness is u shaped in equilibrium

keynesian beauty contest accounting disclosure and market efficiency this paper examines the market efficiency consequences of accounting disclosure in the context of stock markets as a keynesian beauty contest an influential metaphor originally proposed by keynes 1936 and recently formalized by allen morris and shin 2006 in such markets public information plays an additional commonality role biasing stock prices away from the consensus fundamental value toward public information despite this bias i demonstrate that provisions of public information always drive stock prices closer to the fundamental value hence as a main source of public information accounting disclosure enhances market efficiency and transparency should not be compromised on grounds of the keynesian beauty contest effect

a method for agent based models validation abstract this paper proposes a new method to empirically validate simulation models that generate artificial time series data comparable with real world data the approach is based on comparing structures of vector autoregression models which are estimated from both artificial and real world data by means of causal search algorithms this relatively simple procedure is able to tackle both the problem of confronting theoretical simulation models with the data and the problem of comparing different models in terms of their empirical reliability moreover the paper provides an application of the validation procedure to the agent based macroeconomic model proposed by dosi et al 2015

fiscal policy with heterogeneous agents and incomplete markets i undertake a quantitative investigation into the short run effects of changes in the timing of proportional income taxes for model economies in which heterogeneous households face a borrowing constraint temporary tax changes are found to have large real effects in the benchmark model a temporary tax cut increases aggregate consumption on impact by around 29 cents for every dollar of tax revenue lost comparing the benchmark incomplete markets model to a complete markets economy income tax cuts provide a larger boost to consumption and a smaller investment stimulus when asset markets are incomplete copyright 2005 wiley blackwell

r d expenditure in g7 countries and the implications for endogenous fluctuations and growth abstract the literature on endogenous growth cycles predicts countercyclical r d expenditure aggregate r d expenditure in g7 countries from 1973 to 2000 tends to be procyclical implications for future theoretical research are discussed

information acquisition under uncertainty in credit markets this article studies information acquisition through investment in improved risk assessment technology in competitive credit markets a technology has two attributes its ability to screen in productive borrowers and its ability to screen out unproductive borrowers the two attributes have fundamentally different effects on acquisition incentives and the structure of equilibrium informational externalities between lenders the article also studies how uncertainty associated with the quality of superior technology affects information acquisition incentives uncertainty influences information acquisition even with risk neutral banks increased uncertainty may raise or dampen incentives depending on whether uncertainty is respectively about screening out or screening in quality this article studiesinformation acquisition through investment inimproved risk assessment technology in competitive credit markets information acquisition or screening by banks facilitates the rating of creditworthiness and drives the ability to compete in deregulated financial markets 1 although improvements in information technology have augmented the ability to screen borrowers and manage risk the adoption of enhanced screening technologieshas been uneven 2 the centralityand continuation of the information technology revolution forces closer scrutiny of the decision to adopt new technology it is generally argued that more widespread use of better information processing technology will benefit borrowers improve credit allocation and enhance banks competitive positions but will new information processing products or platforms be necessarily adopted if they are costly

the response of household consumption to income tax refunds a central implication of the life cycle or permanent income theory is that consumption should not respond to predictable fluctuations in income tests of this implication have yielded mixed results especially on micro data angus deaton 1992 martin browning and annamaria lusardi 1996 in large part this might be due to the difficulties of isolating the predictable component of income at the micro level most tests proceed by instrumenting for income but since the available instruments are typically poor such tests might be prejudiced against finding significant excess sensitivity of consumption to income john shea 1995 also it is not clear how closely the resulting econometric predictions of income coincide with agents actual expectations of income to avoid these difficulties this paper examines the response of household consumption to a particular type of income that is both predictable and transitory income tax refunds since a refund depends on events in the previous calendar year it is predictable income as regards consumption in the year of its receipt consequently under the life cycle theory consumption should not increase on receipt of a refund 2 in addition to testing the canonical model of consumption this paper provides estimates interpretable as the marginal propensity to consume mpc out of refunds since federal tax refunds now amount to over 80 billion per year averaging well over 1 000 per refund these estimates are of interest in themselves more generally they bear on the impact of even preannounced and temporary changes in fiscal policy the paper begins by surveying related studies in section i section ii describes the data the consumer expenditure survey cex which of the leading u s micro data sets has the most comprehensive coverage of expenditure the empirical specification is set out in section hi section iv reports the results and section v concludes

credit chains and bankruptcy propagation in production networks abstract we present a simple model of a production network in which firms are linked by supplier customer relationships involving extension of trade credit our aim is to identify the minimal set of mechanisms which reproduce qualitatively the main stylized facts of industrial demography such as firms size distribution and at the same time the correlation over time and across firms of output growth and bankruptcies the behavior of aggregate variables can be traced back to the direct firm firm interdependence in this paper we assume that the number of firms is constant and the network has a periodic static structure but the framework allows further extensions to investigate which network structures are more robust against domino effects and if the network is let to evolve in time which structures emerge spontaneously depending on the individual strategies for orders and delivery

beauty contests and iterated expectations in asset markets in a financial market where traders are risk averse and short lived and prices are noisy asset prices today depend on the average expectation today of tomorrow s price thus iterating this relationship the date 1 price equals the date 1 average expectation of the date 2 average expectation of the date 3 price this will not in general equal the date 1 average expectation of the date 3 price we show how this failure of the law of iterated expectations for average belief can help understand the role of higher order beliefs in a fully rational asset pricing model and explain over reaction to noisy public information

allocative efficiency of markets with zero intelligence traders market as a partial substitute for individual rationality we report market experiments in which human traders are replaced by zero intelligence programs that submit random bids and offers imposing a budget constraint i e not permitting traders to sell below their costs or buy above their values is sufficient to raise the allocative efficiency of these auctions close to 100 percent allocative efficiency of a double auction derives largely from its structure independent of traders motivation intelligence or learning adam smith s invisible hand may be more powerful than some may have thought it can generate aggregate rationality not only from individual rationality but also from individual irrationality

a metapopulation model with private property and a common pool abstract a metapopulation illustrated by barnacles has a spatial distribution and a two stage life cycle in the model developed here space limits expansion introducing a profitable harvest activity of adults leads to harvest at only one site a solution driven by biological increasing returns the model is of interdisciplinary interest because the natural resource has common property characteristics in its larval stage but a private property character in its adult stage the model permits economic valuation of lost habitat

agent based macroeconomics a baseline model abstract this paper develops a baseline agent based macroeconomic model and contrasts it with the common dynamic stochastic general equilibrium approach although simple the model can reproduce a lot of the stylized facts of business cycles the author argues that agent based modeling is an adequate response to the recently expressed criticism of macroeconomic methodology because it allows for aggregate behavior that is more than simply a replication of microeconomic optimization decisions in equilibrium at the same time it allows for absolutely consistent microfoundations including the structure and properties of markets most importantly it does not depend on equilibrium assumptions or fictitious auctioneers and does therefore not rule out coordination failures instability and crisis by definition a situation that is very close to a general equilibrium can instead be shown to result endogenously from non rational micro interaction

schumpeter meeting keynes a policy friendly model of endogenous growth and business cycles this paper studies an agent based model that bridges keynesian theories of demandgeneration and schumpeterian theories of technology fueled economic growth we employ the model to investigate the properties of macroeconomic dynamics and the impact of public polices on supply demand and the fundamentals of the economy we find profound complementarities between factors influencing aggregate demand and drivers of technological change that affect both short run fluctuations and longterm growth patterns from a normative point of view simulations show a corresponding complementarity between keynesian and schumpeterian policies in sustaining long run growth paths characterized by milder fluctuations and relatively lower unemployment levels the matching or mismatching between innovative exploration of new technologies and the conditions of demand generation appear to suggest the presence of two distinct regimes of growth or absence thereof characterized by different short run fluctuations and unemployment levels

agent based stock flow consistent macroeconomics towards a benchmark model abstract the 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

loan growth and riskiness of banks we investigate whether loan growth affects the riskiness of individual banks in 16 major countries using bankscope data from more than 16 000 individual banks during 1997 2007 we test three hypotheses on the relation between abnormal loan growth and asset risk bank profitability and bank solvency we find that loan growth leads to an increase in loan loss provisions during the subsequent three years to a decrease in relative interest income and to lower capital ratios further analyses show that loan growth also has a negative impact on the risk adjusted interest income these results suggest that loan growth represents an important driver of the riskiness of banks

dynamic inconsistencies counterfactual implications of a class of rational expectations models a number of recent papers have developed dynamic macroeconomic models that incorporate rational expectations and optimizing foundations while the theoretical motivation behind these models is sound the dynamic implications of many of the specifications that assume rational expectations and optimizing behavior can be seriously at odds with the data for both inflation and real side variables exhibit gradual and hump shaped responses to real and monetary shocks for models that are intended for monetary policy analysis these dynamic shortcomings should be considered quite serious when monetary policy has only short run effects on real variables the inability to approximately capture the short run responses of inflation or real variables to policy shocks makes a model unsuitable for policy analysis this paper identifies a simple feature common to many dynamic specifications for prices and real variables that causes the problem the paper also discusses several potential solutions to the problem including alterations to the expectations assumption to the order of differencing implicit in the model and to the underlying behavioral assumptions this abstract was borrowed from another version of this item

emergent dynamics of a macroeconomic agent based model with capital and credit in this paper we present and discuss a macroeconomic agent based model with capital and credit cc mabm which builds upon the framework put forward by delli gatti et al 2011 the novelty of this model with respect to the previous framework consists in the introduction of a stylized supply chain where upstream firms i e producers of capital goods k firms supply a durable and sticky input capital to the downstream firms who produce consumption goods c firms to be sold to households both c firms and k firms resort to bank loans to satisfy their financing needs there are two way feedbacks between firms and markets which yield interesting emerging properties at the macro level we show that the interaction of upstream and downstream firms and the evolution of their financial conditions in a nutshell capital and credit are essential ingredients of a crisis i e a sizable slump followed by a long recovery

on the concavity of the consumption function at least since keynes 1935 many economists have had the intuition that the marginal propensity to consume out of wealth declines as wealth increases nonetheless standard perfect certainty and certainty equivalent versions of intertemporal optimizing models of consumption imply a marginal propensity to consume that is unrelated to the level of household wealth we show that adding income uncertainty to the standard optimization problem induces a concave consumption function in which as keynes suggested the marginal propensity to consume out of wealth or transitory income declines with the level of wealth