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

the labour augmented k s model a laboratory for the analysis of institutional and policy regimes abstract in this work we discuss the research findings from the labour augmented schumpeter meeting keynes k s agent based model it comprises comparative dynamics experiments on an artificial economy populated by heterogeneous interacting agents as workers firms banks and the government the exercises are characterized by different degrees of labour flexibility or by institutional shocks entailing labour market structural reforms wherein the phenomenon of hysteresis is endogenous and pervasive the k s model constitutes a laboratory to evaluate the effects of new institutional arrangements as active passive labour market policies and fiscal austerity in this perspective the model allows mimicking many of the customary policy responses which the european union and many latin american countries have embraced in reaction to the recent economic crises the obtained results seem to indicate however that most of the proposed policies are likely inadequate to tackle the short term crises consequences and even risk demoting the long run economic prospects more objectively the conclusions offer a possible explanation to the negative path traversed by economies like brazil where many of the mentioned policies were applied in a short period and hint about some risks ahead

structural change and income distribution an inverted u relationship abstract this paper constructs a disequilibrium model in order to analyse the structural transition characterized by the emergence of a new sector we show that in an economy where preferences and technology adapt over time multiple long term outcomes are mainly brought about by different distributive rules governing the assignment of innovative rents between workers and entrepreneurs we robustly establish that a successful transition to a two sector economy is ensured by a balanced distribution restoring the co ordination of investment and consumption plans instead when innovative rents are too concentrated in favor of either workers or entrepreneurs the system does not fully accomplish the transition and unemployment might emerge in contrast with the standard view of a negative relationship between real wages and employment

the federal funds rate and the channels of monetary transmission the authors show that the interest rate on federal funds is extremely informative about future movements of real macroeconomic variables then they argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves that is the funds rate is a good indicator of monetary policy actions finally using innovations to the funds rate as a measure of changes in policy the authors present evidence consistent with the view that monetary policy works at least in part through credit i e bank loans as well as through money i e bank deposits copyright 1992 by american economic association

rational heuristics expectations and behaviors in evolving economies with heterogeneous interacting agents we analyze the individual and macroeconomic impacts of heterogeneous expectations and action rules within an agent based model populated by heterogeneous interacting firms agents have to cope with a complex evolving economy characterized by deep uncertainty resulting from technical change imperfect information coordination hurdles and structural breaks in these circumstances we find that neither individual nor macroeconomic dynamics improve when agents replace myopic expectations with less naive learning rules our results suggest that fast and frugal robust heuristics may not be a second best option but rather rational responses in complex and changing macroeconomic environments jel c63 d8 e32 e6 o4

discussing the role of fiscal policy in a demand led agent based growth model abstract the global financial crisis led to a crisis in mainstream macroeconomic theory and to questioning the economic policies implemented before and after the crisis one of the most relevant controversy concerns the role of fiscal policy in order to present a different theoretical approach and discuss the role of fiscal policy in this paper we present an agent based micro macro multisectoral model to analyze the fiscal policy in a complex evolutionary economy we evaluate the impact of a set of different fiscal rules in terms of short run fluctuations and long term growth the main motivations are both to influence the public debate and to present an important theoretical tool in terms of economic policy debate in particular we analyze the impact of the approval of a new fiscal rule that prevents any real growth of federal public expenditures for at least ten years in brazil based on the simulation model we compare 5 different combinations of fiscal policy on how they affect macro variables such as gdp growth rate gdp volatility and likelihood of crisis we also test how each fiscal policy combination reacts to an external crisis results show that all scenarios that impose a tighter constraint to government spending present signs of self defeating fiscal consolidation including effect on firms indebtedness on the other hand unconstrained countercyclical policy prevents contagious effect of external crisis leading to a better economic performance and reducing the likelihood of crisis

a minsky crisis a model is developed to illustrate hyman minsky s financial crisis theories a key assumption is that the level of wealth in the economy is determined mac roeconomically with the value of firms assets responding to the state of confidence as reflected by discounted quasi rents on capital the second assumption is that there is high substitutability between liabilities of firms and money in the public s portfolio a downward shift in anticipated profits leads wealth to contract and the public to shift portfolio preferences toward money interest rates rise leading to further dampening of expected profits and a debt deflation crisis can occur

biased signaling and yardstick comparisons in a sovereign debt market abstract this paper develops a sovereign debt model in which governments are privately informed about their likelihood of default but can themselves have a biased perception of this likelihood i show that in this setup government borrowing acts as a signal that is only partially informative about fundamental default probabilities and bond prices do not necessarily reflect true credit risk i also show that in a two country version of the model correlations between the two countries induces yardstick comparisons and the borrowing decision of one government affects the bond price received by the other whether the information spillover increases or decreases the distortion created by the bias depends on the extent to which borrowing signals reinforce each other

the effects of interbank networks on efficiency and stability in a macroeconomic agent based model we develop a macroeconomic agent based model that consists of firms banks unions and households who interact on labour goods credit and interbank markets the model endogenises pricing decisions by firms wage setting by unions and interest rate setting by banks on both firm and interbank lending banks also set leverage targets and precautionary liquidity buffers on the basis of internal risk models our model produces endogenous fluctuations driven by the pricing behaviour of firms and the wage setting behaviour of unions fluctuations lead to loan defaults which are exacerbated as lenders reduce lending and charge higher interest rates inducing a credit crunch we also study how making the inter banking network more connected affects the key outcomes of the economy and find that while the flow of funds from surplus banks to firms can be increased the latter effect is soon dominated by increasing instability in the real sector as firms default at higher rates while the banking sector experiences fewer defaults as a whole losses on the interbank market increase as a source of bank defaults

industrial dynamics fiscal policy and r d evidence from a computational experiment we present an agent based computational model in which bounded rational firms and workers trade on fully decentralized markets for final goods and labor by means of random matching protocols the model replicates several macroeconomic phenomena regularly observed in the data with aggregate features emerging from the localized interactions of individual entities the model is then used as a computational laboratory to run an experiment on the role of fiscal policy in increasing macroeconomic performance

the financial instability hypothesis a stochastic microfoundation framework this paper examines the dynamics of financial distress and in particular the mechanism of transmission of shocks from the financial sector to the real economy the analysis is performed by representing the linkages between microeconomic financial variables and the aggregate performance of the economy by means of a microfounded model with firms that have heterogeneous capital structures the model is solved both numerically and analytically by means of a stochastic approximation that is able to replicate quite well the numerical solution these methodologies by overcoming the restrictions imposed by the traditional microfounded approach enable us to provide some insights into the stabilization policies which may be effective in a financially fragile system

what happens during recessions crunches and busts we provide a comprehensive empirical characterization of the linkages between key macroeconomic and financial variables around business and financial cycles for 21 oecd countries over the period 1960 2007 in particular we analyse the implications of 122 recessions 113 28 credit contraction crunch episodes 114 28 episodes of house price declines busts 245 61 episodes of equity price declines busts and their various overlaps in these countries over the sample period our results indicate that the interactions between macroeconomic and financial variables can play a major role in determining the severity and duration of a recession specifically we find evidence that recessions associated with credit crunches and house price busts tend to be deeper and longer than other recessions stijn claessens m ayhan kose and marco e terrones

what if supply side policies are not enough the perverse interaction of flexibility and austerity abstract in this work we develop a set of labour market and fiscal policy experiments upon the labour and credit augmented schumpeter meeting keynes agent based model the labour market is declined under two institutional variants the fordist and the competitive set ups meant to capture the historical transition from the post wwii toward the post thatcher reagan period inside these two regimes we study the different effects of supply side active labour market policies almps vs demand management passive labour market ones plmps in particular we analyse the effects of almps aimed at promoting job search and at providing training to unemployed people next we compare the effects of these policies with unemployment benefits meant to sustain income and therefore aggregate demand considering the burden of unemployment benefits in terms of the public budget we link such provision with the objectives of the european stability and growth pact our results show that i an appropriate level of skills is not enough to sustain growth when workers face adverse labour demand ii supply side policies are not able to reverse the negative interaction between flexibility and austerity iii plmps outperform almps in reducing unemployment and workers skill deterioration and iv demand management policies are better suited to mitigate inequality and to sustain long run growth

modeling macroeconomies as open ended dynamic systems of interacting agents uall models are wrong but some are useful g e p box 1979 macroeconomists seek to understand the structure and performance of economies at a national or regional level and the manner in which government policymakers attempt to influence this structure and performance over time such understanding would seem to require a systematic exploration of the intricate feedback loops connecting micro behaviors interaction patterns and macro regularities as observed in real world economies

rethinking macroeconomics what failed and how to repair it the standard macroeconomic models have failed by all the most important tests of scientific theory they did not predict that the financial crisis would happen and when it did they understated its effects monetary authorities allowed bubbles to grow and focused on keeping inflation low partly because the standard models suggested that low inflation was necessary and almost sufficient for efficiency and growth after the crisis broke policymakers relying on the models floundered notwithstanding the diversity of macroeconomics the sum of these failures points to the need for a fundamental re examination of the models and a reassertion of the lessons of modern general equilibrium theory that were seemingly forgotten in the years leading up to the crisis this paper first describes the failures of the standard models in broad terms and then develops the economics of deep downturns and shows that such downturns are endogenous further the paper argues that there have been systemic changes to the structure of the economy that made the economy more vulnerable to crisis contrary to what the standard models argued finally the paper contrasts the policy implications of our framework with those of the standard models

investment and time to plan and build a comparison of structures vs equipment in a panel of italian firms time to build models of investment expenditures play an important role in many traditional and modern theories of the business cycle especially for explaining the dynamic propagation of shocks we estimate the structural parameters of a time to build model using annual firm level investment data on equipment and structures for expenditures on equipment we find no evidence of time to build effects beyond one year for expenditures on structures by contrast there is clear evidence of such effects in the range of two to three years the contrast between equipment and structures is intuitively reasonable and consistent with previous results the estimates for structures also indicate that initial period expenditures are low and increase as projects near completion these results provide empirical support for including time to plan effects for investment in structures more generally these results suggest a potential source of specification error for q models of investment and production based asset pricing models that ignore the time required to plan build and install new capital jel d24 g31 c33 c34

cash flow investment and keynes minsky cycles this paper analyzes a dynamic model with 1 an investment function that emphasizes cash flow 2 a keynesian macroeconomic framework that determines cash flow endogenously 3 a dynamic labor market model that drives wage and price adjustments and 4 boundedly rational expectations simulations from the calibrated model generate endogenous cycles with characteristics described in hyman minsky s research the cycle arises from the link between investment interest rates debt service and cash flow the amplitude and frequency of the cycle are related to the importance of cash flow for investment the dynamics of inflation and the distribution of income

budgetary rigour with stimulus in lean times policy advices from an agent based model abstract the 2008 financial crisis and the subsequent global recession triggered a wide spread economic and political debate on the proper policy combination to deal with the crisis and to prevent similar ones in the future probably the main dispute has been around the use of fiscal instruments in order to foster growth while keeping public debt under control the european union for instance endorsed austerity measures for fiscal consolidation but has been sharply criticized by several scholars this paper aims at contributing to the current debate by presenting the outcomes of a computational study performed with the eurace agent based model we set up an experiment with two base policy scenarios i e stability and growth pact and fiscal compact incrementally enriching them with complementary policies which relax fiscal rigidity and introduce quantitative easing results show that budgetary rigour performs well if and only if some mechanisms of fiscal relaxation and monetary accommodation are considered during bad times thus confirming in a richer and more realistic model setting the fundamental tenet of keynesian economics about the importance of sustaining aggregate demand during recessions

income distribution credit and fiscal policies in an agent based keynesian model this work studies the interactions between income distribution and monetary and fiscal policies in terms of ensuing dynamics of macro variables gdp growth unemployment etc on the grounds of an agent based keynesian model the direct ancestor of this work is the keynes meeting schumpeter formalism presented in dosi et al 2010 to that model we add a banking sector and a monetary authority setting interest rates and credit lending conditions the model combines keynesian mechanisms of demand generation a schumpeterian innovation fueled process of growth and minskian credit dynamics the robustness of the model is checked against its capability to jointly account for a large set of empirical regularities both at the micro level and at the macro one the model is able to catch salient features underlying the current as well as previous recessions the impact of financial factors and the role in them of income distribution we find that different income distribution regimes heavily affect macroeconomic performance more unequal economies are exposed to more severe business cycles fluctuations higher unemployment rates and higher probability of crises on the policy side fiscal policies do not only dampen business cycles reduce unemployment and the likelihood of experiencing a huge crisis in some circumstances they also affect positively long term growth further the more income distribution is skewed toward profits the greater the effects of fiscal policies about monetary policy we find a strong non linearity in the way interest rates affect macroeconomic dynamics in one regime with low rates changes in interest rates are ineffective up to a threshold beyond which increasing the interest rate implies smaller output growth rates and larger output volatility unemployment and likelihood of crises

inequality household debt and financial instability an agent based perspective abstract our paper contributes to the literature on the causes of the 2007 2008 financial crisis in the united states by means of an agent based model we replicate an artificial credit network economy in order to assess the impact of growing income inequality in the presence of peer effects and home equity borrowing we show that the resulting debt financed consumption boom jeopardises the stability of the economic system thus paving the way for a financial crisis our model includes a behavioural rule for consumption based on expenditure cascades a hierarchical structure of household finance an articulated credit market with collateralised consumption loans and mortgages and a simple housing market results show that the model is able to capture the economic and social pressure of inequality on low and middle income households that pushes them to increase their consumption via home equity extraction rising non performing loans lead to higher bad debt on the banks balance sheets and consequently to the emergence of a crisis as an endogenous dynamic

a new approach to business fluctuations heterogeneous interacting agents scaling laws and financial fragility abstract in this paper we discuss a scaling approach to business fluctuations our starting point consists in recognizing that concepts and methods derived from physics have allowed economists to re discover a set of stylized facts which have to be satisfactorily accounted for in their models standard macroeconomics based on a reductionist approach centered on the representative agent is definitely badly equipped for this task on the contrary we show that a simple financial fragility agent based model based on complex interactions of heterogeneous agents is able to replicate a large number of scaling type stylized facts with a remarkable high degree of statistical precision

the elusive concept of innovation for schumpeter marschak and the early econometricians abstract the modern concept of innovation is a crucial part of the analysis of capitalism as an adaptive system and it is due to schumpeter consequently schumpeter s role as a prophet of innovation has been rightly emphasized this paper contributes to that history presenting some of the difficulties schumpeter suffered as a formal representation of innovation was proposed by his fellow econometricians as proved by the case of one of such dialogs that with jacob marschak at the time the director of the cowles commission and vice president and then president of the econometric society it is shown how schumpeter elaborated his concepts of endogenous innovation and of industrial mutation as contrasted to the mechanical view of his fellow econometricians finally the paper emphasizes the changes of the concept of randomness through the debate

comparative analysis of firm demographics and survival evidence from micro level sources in oecd countries in this paper we present cross country evidence on firm size distribution firm demographic and post entry performance for 10 oecd countries we use harmonized firm level data drawn from business registers or social security records these data enable international comparisons and the identification of idiosyncratic country effects while average firm size differs across countries due to both sectoral specialization and within sector characteristics we find similar degrees of firm churning across countries in most of them about 20 of firms enter and exit most markets every year and about 20 40 of entering firms fail within the first 2 years of life however post entry growth of successful entrants is much higher in the usa than in europe which may be indicative of barriers to firm growth as opposed to barriers to entry

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

the financial accelerator in an evolving credit network we model a credit network characterized by credit relationships connecting i downstream d and upstream u firms and ii firms and banks the net worth of d firms is the driver of fluctuations the production of d firms and of their suppliers u firms in fact is constrained by the availability of internal finance proxied by net worth to the d firms the structure of credit interlinkages changes over time due to an endogeneous process of partner selection which leads to the polarization of the network at the aggregate level the distribution of growth rates exhibits negative skewness and excess kurtosis when a shock hits the macroeconomy or a significant group of agents in the credit network a bankruptcy avalanche can follow if agents leverage is critically high in a nutshell we want to explore the properties of a network based financial accelerator

public policies and the art of catching up matching the historical evidence with a multicountry agent based model in this paper we study the effects of industrial policies on international convergence using a multi country agent based model which builds upon dosi et al 2019b the model features a group of microfounded economies with evolving industries populated by heterogeneous firms that compete in international markets in each country technological change is driven by firms activities of search and innovation while aggregate demand formation and distribution follows keynesian dynamics interactions among countries take place via trade flows and international technological imitation we employ the model to assess the different strategies that laggard countries can adopt to catch up with leaders market friendly policies industrial policies targeting the development of firms capabilities and rd protectionist policies focusing on tariffs only we find that markets cannot do the magic in absence of government interventions laggards will continue to fall behind on the contrary industrial policies can successfully drive international convergence among leaders and laggards while protectionism alone is not necessary to support catching up and countries get stuck in a sort of middle income trap finally in a global trade war where developed economies impose retaliatory tariffs both laggards and leaders are worse off and world productivity growth slows down

faraway so close coupled climate and economic dynamics in an agent based integrated assessment model abstract in this work we develop an agent based model that offers an alternative to standard computable general equilibrium integrated assessment models iams the dystopian schumpeter meeting keynes dsk model is composed of heterogeneous firms belonging to capital good consumption good and energy sectors production and energy generation lead to greenhouse gas emissions which affect temperature dynamics climate damages are modelled at the individual level as stochastic shocks hitting workers labour productivity energy efficiency capital stock and inventories of firms in that aggregate damages emerge from the aggregation of losses suffered by heterogeneous interacting and boundedly rational agents the model is run focusing on a business as usual carbon intensive scenario consistent with a representative concentration pathway 8 5 we find that the dsk model is able to account for a wide ensemble of micro and macro empirical regularities concerning both economic and climate dynamics simulation experiments show a substantial lack of isomorphism between the effects of micro and macro level shocks as it is typical in complex system models in particular different types of shocks have heterogeneous impact on output growth unemployment rate and the likelihood of economic crises pointing to the importance of the different economic channel affected by the shock overall we report much larger climate damages than those projected by standard iams under comparable scenarios suggesting possible shifts in the growth dynamics from a self sustained pattern to stagnation and high volatility and the need of urgent policy interventions

financial structure and aggregate economic activity an overview this paper surveys literature that explores the possible links between the financial system and aggregate economic behavior the survey is in two parts the first reviews the traditional work and the second discusses new research copyright 1988 by ohio state university press

causes and consequences of hysteresis aggregate demand productivity and employment in this work we develop an agent based model where hysteresis in major macroeconomic variables e g gross domestic product productivity unemployment emerges out of the decentralized interactions of heterogeneous firms and workers building upon the schumpeter meeting keynes family of models cf in particular dosi et al 2016b 2017c we specify an endogenous process of accumulation of workers skills and a state dependent process of firms entry indeed hysteresis is ubiquitous however this is not due to market imperfections but rather to the very functioning of decentralized economies characterized by coordination externalities and dynamic increasing returns so contrary to the insider outsider hypothesis blanchard and summers 1986 the model does not support the findings that rigid industrial relations may foster hysteretic behavior in aggregate unemployment on the contrary this contribution provides evidence that during severe downturns and thus declining aggregate demand phenomena like decreasing investment and innovation rates skills deterioration and declining entry dynamics are better candidates to explain long run unemployment spells and reduced output growth in that more rigid labor markets may well dampen hysteretic dynamics by sustaining aggregate demand thus making the economy more resilient

coordination through social learning in a general equilibrium model this paper analyses coordination through social learning in a general equilibrium model we use a fully decentralized economy in which households and firms exchange labour and consumption goods in the corresponding markets with potential rationing their strategies are updated through an evolutionary learning process based on imitation and random experimenting this learning process induces substantial coordination failures especially between firms which lead almost systematically to below equilibrium output levels and social welfare losses the main underlying mechanism is a self reinforcing uneven distribution of households income which results in a lack of aggregate demand

is the food and drug administration safe and effective in the united states the food and drug administration fda provides public oversight of the safety and efficacy of drugs medical devices biologics like vaccines and blood products cosmetics radiation emitting electronic products veterinary products and all foods except meat and poultry which are regulated by the department of agriculture according to the fda the products it regulates account for more than one fifth of u s consumer spending in the area of medical products the fda is responsible for determining whether marketed products are both safe and effective before and after they have been marketed in this paper we will explore whether the policies of the agency itself are safe and effective we stress two issues one static and one dynamic the static issue concerns the potential duplication inefficiency when product safety is protected not only by the fda but also by the private sector through product liability law put another way what is the rationale for using product liability and the fda to regulate drug safety while intuitively it may seem that two systems must be better than one in ensuring drug safety each system comes with costs we then turn to the dynamic issue the speed safety trade off and consider the extent to which higher safety is achieved at a cost of later market entry of effective and even life saving products we assess the prescription drug user fee acts pdufas which increased the speed of the agency s regulatory process starting in 1992 although according to some at the cost of reducing drug safety we conclude by suggesting a research agenda for future work on the food and drug administration

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

to bail out or to bail in answers from an agent based model since the beginning of the 2008 financial crisis almost half a trillion euros have been spent to financially assist eu member states in taxpayer funded bail outs these crisis resolutions are often accompanied by austerity programs causing political and social friction on both domestic and international levels the question of how to resolve failing financial institutions and how this depends on economic preconditions is therefore a pressing and controversial issue of vast political importance in this work we employ an agent based model to study the economic and financial ramifications of three highly relevant crisis resolution mechanisms to establish the validity of the model we show that it reproduces a series of key stylized facts of the financial and real economy the distressed institution can either be closed via a purchase assumption transaction it can be bailed out using taxpayer money or it may be bailed in in a debt to equity conversion we find that for an economy characterized by low unemployment and high productivity the optimal crisis resolution with respect to financial stability and economic productivity is to close the distressed institution for economies in recession with high unemployment the bail in tool provides the most efficient crisis resolution mechanism under no circumstances do taxpayer funded bail out schemes outperform bail ins with private sector involvement

macroeconomic simulation comparison with a multivariate extension of the markov information criterion abstract the paper aims to address the issue of comparing agent based models abms with more traditional var and dsge models by developing a multivariate extension of the markov information criterion mic of barde 2017 the univariate mic measures the informational distance between a simulation model and some empirical data by mapping the simulated data to a markov transition matrix and is proven to provide an unbiased measurement for all models reducible to a markov process as a result the mic can accurately measure distance using only simulated data for a wide class of data generating processes the paper first presents the multivariate extension of the mic and its validation on var and dgse models before carrying the first direct comparison between a macroeconomic abm and a dgse model namely the benchmark abm of caiani et al 2016 and smets and wouters 2007

toward a new microfounded macroeconomics in the wake of the crisis the great recession that followed the financial crisis of 2007 is not only the largest economic crisis after the great depression of the 1930s it also signals a crisis of economics as a discipline this is not only the consequence of the inadequacy of mainstream macroeconomics and specifically the dynamic stochastic general equilibrium dsge workhorse model to forecast such a huge event or at least to detect the worrying tendencies towards it even more relevant is the choice to explicitly avoid the modeling of large crises that for someone is a motivation for not attacking pre crisis dsge models focused on the analysis of small deviations from the steady state so denying the intrinsic nature of capitalism a system that necessarily proceeds through cycles and extended crises the replies of the dsge approach to critics have led to extensions regarding for instance the role of financial frictions heterogeneous agents and bounded rationality though typically in the form of quasi rational expectations the alternative paradigm of agent based ab macroeconomics can take into account all these elements at once within an evolutionary modeling framework based on heterogeneity and interaction so capable to endogenously reproduce complex dynamics from small fluctuations to large crises due to innovation and industrial dynamics rising inequality and financial instability and so on the integration between ab macroeconomics and the post keynesian stock flow consistent approach represents a promising way for the future development of this research field

between scylla and charybdis income distribution consumer credit and business cycles we introduce a macroeconomic model with heterogeneous households and an aggregate banking sector in order to analyze the impact of rising income inequality under different credit scenarios growing inequality produces debt led consumption boom dynamics when the banking sector is characterized by a lower capital requirement and a higher willingness to lend instead when inequality rises but the banking sector is highly regulated aggregate demand and output fall our results also yield new insights on the appropriate fiscal policy reaction to stabilize the economy acting on the progressivity of the tax system seems more effective than a proactive countercyclical fiscal policy jel c63 d31 e62 g01

income inequality consumption credit and credit risk in a data driven agent based model abstract the issue of income inequality occupies a prominent position in the research agenda of academic and policy circles alike especially after the crisis of 2008 due to its potential causal link with the development of credit bubbles and therefore the emergence of financial crises this paper examines the long run effect of income inequality on consumption consumer credit and non performing loans through the means of a data driven agent based model the data driven nature of the model enhances its ability to match historical series and thus makes it suitable for policy simulations tailored for specific economies the analysis indicates that higher income inequality has a detrimental impact on consumption and is associated with lower volumes of consumer credit however the ratio of non performing loans as a share of total loans seems to be independent of income inequality

the dynamics of leverage in a demand driven model with heterogeneous firms abstract this paper introduces heterogeneous microeconomic behavior into a demand driven macroeconomic model in order to study the joint dynamics of leverage and capital accumulation by identifying the links between firm level variables and aggregate quantities the paper contributes toward a reformulation of the minskyan formal analysis that explicitly considers the role of microeconomic factors in generating macroeconomic instability the aggregation of heterogeneous agents is not only performed numerically as in traditional agent based models but also by means of an innovative analytical methodology originally developed in statistical mechanics and recently imported into macroeconomics the distinctive feature is in that the joint analysis of the numerical and analytical solutions of the model sheds light on the effects of financial fragility at the firm level on the dynamics of the macroeconomy in particular the analysis of steady state and stability properties of the system provide additional insights on the role of behavioral and size heterogeneity of firms for the stocks of aggregate debt and capital

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