Novel Modelling of the Operation of the Financial Intermediary System – Agent-based Macro Models

Author information:

Bence Mérő: Magyar Nemzeti Bank, Economic Analyst; Corvinus University of Budapest, Assistant Lecturer. E-mail: merob@mnb.hu

Cite as (APA):

Mérő, B. (2019). Novel Modelling of the Operation of the Financial Intermediary System – Agent-based Macro Models. Financial and Economic Review, 18(3), 83–113. https://doi.org/10.33893/FER.18.3.83113

Column:

Study

Journal of Economic Literature (JEL) codes:

B52, E44, Y2

Keywords:

agent-based modelling, banking sector, money creation

References:

Alpanda, S. – Cateau, G. – Meh, C. (2018): A policy model to analyze macroprudential regulations and monetary policy. Canadian Journal of Economics, 51(3): 828–863. https://doi.org/10.1111/caje.12339

Ashraf, Q. – Gershman, B. – Howitt, P. (2017): Banks, market organization, and macroeconomic performance: An agent-based computational analysis. Journal of Economic Behaviour & Organization, 135(March): 143–180. https://doi.org/10.1016/j.jebo.2016.12.023

Assenza, T. – Delli Gatti, D. – Grazzini, J. (2015): Emergent dynamics of a macroeconomic agent based model with capital and credit. Journal of Economic Dynamics & Control, 50(January): 5–28. https://doi.org/10.1016/j.jedc.2014.07.001

Axtell, R. – Farmer, D. – Geanakoplos, J. – Howitt, P. – Carrella, E. – Conlee, B. – Goldstein, J. – Hendrey, M. – Kalikman, P. – Masad, D. – Palmer, N. – Yang, C.-Y. (2014): An Agent-Based Model of the Housing Market Bubble in Metropolitan Washington, D. C. Deutsche Bundesbank’s Spring Conference on ‘Housing markets and the macroeconomy: challenges for monetary policy and financial stability’.

Baptista, R. – Farmer, J.D. – Hinterschweiger, M. – Low, K. – Tang, D. – Uluc, A. (2016): Macroprudential policy in an agent-based model of the UK housing market. Bank of England Staff Working Paper, 619. http://dx.doi.org/10.2139/ssrn.2850414

Benes, J. – Kumhof, M. – Laxton, D. (2014): Financial Crises in DSGE Models: A Prototype Model. IMF Working Papers 14/57. https://doi.org/10.5089/9781475540895.001

Békési, L. – Köber, Cs. – Kucsera, H. – Várnai, T. – Világi, B. (2016): The macroeconomic forecasting model of the MNB. MNB Working Papers, 2016/4.

Caiani, A. – Godin, A. – Caverzasi, E. – Gallegati, M. (2016): Agent based-stock flow consistent macroeconomics: Towards a benchmark model. Journal of Economic Dynamics & Control, 69(August): 375–408. https://doi.org/10.1016/j.jedc.2016.06.001

Carroll, C.D. (2001): A theory of the consumption function, with and without liquidity constraints. Journal of Economic Perspectives, 15(3): 23–45. https://doi.org/10.1257/jep.15.3.23

Chadha, J.S. – Corrado, L. (2012): Macro-prudential policy on liquidity: What does a DSGE model tell us? Journal of Economics and Business, 64(1): 37–62. https://doi.org/10.1016/j.jeconbus.2011.04.004

Chiarella, C. – Di Guilmi, C. (2011): The financial instability hypothesis: A stochastic microfoundation framework. Journal of Economic Dynamics & Control, 35(8): 1151–1171. https://doi.org/10.1016/j.jedc.2011.02.005

Chiarella, C. – Di Guilmi, C. (2012): The Fiscal Cost of Financial Instability. Studies in Nonlinear Dynamics & Econometrics, 16(4): 1–29. https://doi.org/10.1515/1558-3708.1970

Christiano, L. – Motto, R. – Rostagno, M. (2010): Financial factors in economic fluctuations. Working Paper Series 1192, European Central Bank.

Christiano, L. – Motto, R. – Rostagno, M. (2014): Risk shocks. American Economic Review, 104(1): 27–65. https://doi.org/10.1257/aer.104.1.27

Cincotti, S. – Raberto, M. – Teglio, A. (2012): The EURACE macroeconomic model and simulator. In: Aoki, M. – Binmore, K. – Deakin, S. – Gintis, H. (ed.): Complexity and Institutions: Markets, Norms and Corporations, 81–106. Palgrave McMillan.

Copeland, M.A. (1949): Social accounting for moneyflows. The Accounting Review, 24(3): 254–264.

Cúrdia, V. – Woodford, M. (2016): Credit frictions and optimal monetary policy. Journal of Monetary Economics, 84(C): 30–65. https://doi.org/10.1016/j.jmoneco.2016.10.003

Deissenberg, C. – van der Hoog, S. – Dawid, H. (2008): EURACE: A massively parallel agent-based model of the European economy. Applied Mathematics and Computation, 204(2): 541–552. https://doi.org/10.1016/j.amc.2008.05.116

Dawid, H. – Delli Gatti, D. (2018): Agent-Based Macroeconomics. Bielefeld Working Papers in Economics and Management, 02–2018. http://dx.doi.org/10.2139/ssrn.3112074

Delli Gatti, D. – Desiderio, S. – Gaffeo, E. – Cirillo, P. – Gallegati, M. (2011): Macroeconomics from the Bottom-up. Springer-Verlag, Italy. https://doi.org/10.1007/978-88-470-1971-3

Delli Gatti, D. – Gaffeo, E. – Gallegati, M. – Giulioni, G. – Palestrini, A. (2008): Emergent Macroeconomics. An Agent-Based Approach to Business Fluctuations. Springer-Verlag, Italy.

Delli Gatti, D. – Gallegati, M. – Greenwald, B. – Russo, A. – Stiglitz, J. (2010): The financial accelerator in an evolving credit network. Journal of Economic Dynamics & Control, 34(9): 1627–1650. https://doi.org/10.1016/j.jedc.2010.06.019

De Grauwe, P. (2012): Booms and busts in economic activity. Journal of Economic Behaviour & Organization, 83(3): 484–504. https://doi.org/10.1016/j.jebo.2012.02.013

Deaton, A. (1992): Household Saving in LDCs: Credit Markets, Insurance and Welfare. The Scandinavian Journal of Economics, 94(2): 253–273. https://doi.org/10.2307/3440451

Dilaver, O. – Jump, R. – Levine, P. (2018): Agent-based macroeconomics and dynamic stochastic general equilibrium models: Where do we go from here? Journal of Economic Surveys, 32(4): 1134–1159. https://doi.org/10.1111/joes.12249

Dosi, G. – Fagiolo, G. – Napoletano, M. – Roventini, A. (2013): Income distribution, credit and fiscal policies in an agent-based Keynesian model. Journal of Economic Dynamics & Control, 37(8): 1598–1625. https://doi.org/10.1016/j.jedc.2012.11.008

Dosi, G. – Fagiolo, G. – Napoletano, M. – Roventini, A. – Treibich, T. (2015): Fiscal and monetary policies in complex evolving economies. Journal of Economic Dynamics & Control, 52(March): 166–189. https://doi.org/10.1016/j.jedc.2014.11.014

Dosi, G. – Fagiolo, G. – Roventini, A. (2006): An evolutionary model of endogenous business cycles. Computational Economics, 27(1): 3–34. https://doi.org/10.1007/s10614-005-9014-2

Dosi, G. – Fagiolo, G. – Roventini, A. (2008): The microfoundations of business cycles: an evolutionary, multi-agent model. Journal of Evolutionary Economics, 18(3–4): 413–432. https://doi.org/10.1007/s00191-008-0094-8

Dosi, G. – Fagiolo, G. – Roventini, A. (2010): Schumpeter meeting Keynes: A policy-friendly model of endogenous growth and business cycles. Journal of Economic Dynamics & Control, 34(9): 1748–1767. https://doi.org/10.1016/j.jedc.2010.06.018

Dosi, G. – Napoletano, M. – Roventini, A. – Treibich, T. (2017a): Micro and macro policies in the Keynes+Schumpeter evolutionary models. Journal of Evolutionary Economics, 27(1): 63–90. https://doi.org/10.1007/s00191-016-0466-4

Dosi, G. – Pereira, M. C. – Roventini, A. – Virgillito, M. (2017b): When more flexibility yields more fragility: The microfoundations of Keynesian aggregate unemployment. Journal of Economic Dynamics & Control, 81(August): 162–186. https://doi.org/10.1016/j.jedc.2017.02.005

Drehmann, M. – Borio, C. – Tsatsaronis, K. (2012): Characterising the financial cycle: don’t lose sight of the medium term! BIS Working Papers, 380.

Erlingsson, E. – Teglio, A. – Cincotti, S. – Stefansson, H. – Sturluson, J. – Raberto, M. (2014): Housing Market Bubbles and Business Cycles in an Agent-Based Credit Economy. Economics: The Open-Access, Open-Assessment E-Journal, 8, 1–42. http://dx.doi.org/10.5018/economics-ejournal.ja.2014-8

Fagiolo, G. – Roventini, A. (2017): Macroeconomic Policy in DSGE and Agent-Based Models Redux: New Developments and Challenges Ahead. Journal of Artificial Societies and Social Simulation, 20(1) 1. https://doi.org/10.18564/jasss.3280

Farmer, J. D. – Foley, D. (2009): The economy needs agent-based modelling. Nature, 460(August): 685–686. https://doi.org/10.1038/460685a

Gertler, M. – Kiyotaki, N. (2010): Financial Intermediation and Credit Policy in Business Cycle Analysis. Handbook of Monetary Economics, Volume 3, pp. 547–599. https://doi.org/10.1016/B978-0-444-53238-1.00011-9

Gertler, M. – Karádi, P. (2011): A model of unconventional monetary policy. Journal of Monetary Economics, 58(1): 17–34. https://doi.org/10.1016/j.jmoneco.2010.10.004

Grazzini, J. – Richiardi, M. (2015): Estimation of ergodic agent-based models by simulated minimum distance. Journal of Economic Dynamics & Control, 51(February): 148–165. https://doi.org/10.1016/j.jedc.2014.10.006

Grazzini, J. – Richiardi, M. – Tsionas, M. (2017): Bayesian estimation of agent-based models. Journal of Economic Dynamics & Control, 77(April): 26–47. https://doi.org/10.1016/j.jedc.2017.01.014

Godley, W. – Lavoie, M. (2007): Monetary economics – An Integrated Approach to Credit, Money, Income, Production and Wealth. Palgrave MacMillan, New York.

Haldane, A. G. – Turrell, A. E. (2018): An interdisciplinary model for macroeconomics. Oxford Review of Economic Policy, 34(1–2): 219–251. https://doi.org/10.1093/oxrep/grx051

Holcombe, M. – Coakley, S. – Kiran, M. – Chin, S. – Greenough, C. – Worth, D. – Cincotti, S. – Raberto, M. – Teglio, A. – Deissenberg, C. – van der Hoog, S. – Dawid, H. – Gemkow, S. – Harting, P. – Neugart, M. (2013): Large-scale modeling of economic systems. Complex Systems, 22(2): 175–191. https://doi.org/10.25088/ComplexSystems.22.2.175

Hosszú, Zs. – Mérő, B. (2017): Hitelciklusok és anticiklikus tőkepuffer egy ágensalapú keynesi modellben (Credit cycles and the counter-cyclical capital buffer in an agent-based Keynesian model). Közgazdasági Szemle (Economic Review), 64(May): 457–475. https://doi.org/10.18414/KSZ.2017.5.457

Jakab, Z. – Kumhof, M. (2015): Banks are not intermediaries of loanable funds – and why this matters. Bank of England Working Papers, No. 529. http://dx.doi.org/10.2139/ssrn.2612050

Kaplan, G. – Moll, B. – Violante, G. L. (2018): Monetary Policy According to HANK. American Economic Review, 108(3): 697–743. https://doi.org/10.1257/aer.20160042

Krug, S. (2018): The interaction between monetary and macroprudential policy: should central banks ‘lean against the wind’ to foster macro-financial stability? Economics: The Open-Access, Open-Assessment E-Journal, 12–7, 1–69. http://dx.doi.org/10.5018/economics-ejournal.ja.2018-7

Krugman, P. (2011): The Profession and the Crisis. Eastern Economic Journal, 37(3): 307–312. https://doi.org/10.1057/eej.2011.8

Lamperti, F. – Roventini, A. – Sani, A. (2018): Agent-based model calibration using machine learning surrogates. Journal of Economic Dynamics & Control, 90(C): 366–389. https://doi.org/10.1016/j.jedc.2018.03.011

Lindé, J. – Smets, F. – Wouters, R. (2016): Challenges for Central Banks’ Macro Models, in: Taylor, J.B. – Uhlig, H. (ed.): Handbook of Macroeconomics. North Holland, Volume 2, 2185–2262. https://doi.org/10.1016/bs.hesmac.2016.04.009

Mérő, B. – Vágó, N. (2018): Keresletvezérelt lakáspiaci modell a lakáshitelezést szabályozó makro prudenciális eszközök tanulmányozására (A demand-led model of the housing market for studying the macro-prudential means of regulating housing loans). Közgazdasági Szemle (Economic Review), 65(November): 1115–1153. http://dx.doi.org/10.18414/KSZ.2018.11.1115

McLeay, M. – Radia, A. – Thomas, R. (2014): Money creation in the modern economy. Bank of England, Quarterly Bulletin 2014Q1, 14–27.

Pyka, A. – Fagiolo, G. (2007): Agent-based modelling: A methodology for Neo-Schumpeterian economics, in: Hanusch, H. – Pyka, A. (ed.): The Elgar Companion to Neo-Schumpeterian Economics. Cheltenham, Edward Elgar Publishing.

Popoyan, L. – Napoletano, M. – Roventini, A. (2017): Taming macroeconomic instability: Monetary and macro-prudential policy interactions in an agent-based model. Journal of Economic Behaviour & Organization, 134(February): 117–140. https://doi.org/10.1016/j.jebo.2016.12.017

Raberto, M. – Teglio, A. – Cincotti, S. (2012): Debt, Deleveraging and Business Cycles. An Agent-Based Perspective. Economics: The Open-Access, Open-Assessment E-Journal, 6, 1–49. http://dx.doi.org/10.5018/economics-ejournal.ja.2012-27

Riccetti, L. – Russo, A. – Gallegati, M. (2013): Leveraged network-based financial accelerator. Journal of Economic Dynamics & Control, 37(8): 1626–1640. https://doi.org/10.1016/j.jedc.2013.02.008

Riccetti, L. – Russo, A. – Gallegati, M. (2016): Stock market dynamics, leveraged network-based financial accelerator and monetary policy. International Review of Economics & Finance, 43(May): 509–524. https://doi.org/10.1016/j.iref.2016.01.012

Romer, P. (2016): The Trouble With Macroeconomics. The American Economist, under publication. https://paulromer.net/trouble-with-macroeconomics-update/. Downloaded: 15 April 2018.

Salle, I. (2015): Modeling expectations in agent-based models – An application to central bank’s communication and monetary policy. Economic Modelling, 46(April): 130–141. https://doi.org/10.1016/j.econmod.2014.12.040

Salle, I. – Yildizoglu, M. – Sénégas, M.-A. (2013): Inflation targeting in a learning economy: An ABM perspective. Economic Modelling, 34(August): 114–128. https://doi.org/10.1016/j.econmod.2013.01.031

Schüler, Y. – Hiebert, P. – Peltonen, T. (2015): Characterising the Financial Cycle: A Multivariate and Time-Varying Approach. ECB Working Paper, 1846.

Stiglitz, J. (2011): Rethinking Macroeconomics: What Failed, and How to Repair It. Journal of the European Economic Association, 9(4): 591–645. https://doi.org/10.1111/j.1542-4774.2011.01030.x

Stolzenburg, U. (2015): The agent-based Solow growth model with endogenous business cycles. Economics Working Papers 2015-01, Christian-Albrechts-University of Kiel, Department of Economics.

Tesfatsion, L. – Judd, K. (ed.) (2006): Handbook of Computational Economics. Volume 2: Agent-Based Computational Economics. North Holland.