Agent-Based Macroeconomic Modeling and Policy Analysis
Summary
Agent-based macroeconomic modelling represents a paradigm shift from traditional aggregate frameworks by simulating economies as networks of heterogeneous decision-making units whose interactions give rise to aggregate dynamics. Each agent—be it a household, firm or financial institution—operates according to behavioural rules, adapts to evolving circumstances and interacts with others via markets and credit networks. Such models capture non-linear feedback, financial contagion and the formation of expectations in a way that closed-form equilibrium models cannot. They accommodate bounded rationality, learning and institutional detail, enabling researchers to conduct policy experiments under realistic constraints. Calibration against micro and macro data allows these platforms to forecast business cycles, stress-test financial regulations or assess the distributional impacts of monetary, fiscal and labour-market interventions. By revealing emergent phenomena such as self-reinforcing crises or endogenous stabilisation, agent-based studies inform policy design in an increasingly uncertain global environment.
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Agent-Based Macroeconomic Modeling and Policy Analysis publication trend
The graph below shows the total number of articles in agent-based macroeconomic modeling and policy analysis across all publications each year (not limited to Nature Index journals).
Technical terms
Agent-based model: A computational framework that simulates the interactions of autonomous, heterogeneous agents to observe aggregate outcomes.
Heterogeneous agents: Economic actors endowed with diverse characteristics and behavioural rules rather than representative optimisers.
Emergent phenomena: Macro-level regularities or patterns that arise from micro-level interactions without being imposed exogenously.
Calibration: The process of adjusting model parameters so that simulated output aligns with empirical data.
Stock-flow consistent model: An accounting framework that ensures all stocks (e.g., assets, debts) and flows (e.g., transactions, income) are coherently linked over time.
References
- Economics for an uncertain world. World Development (2024).
- Credit Money and Macroeconomic Instability in the Agent-based Model and Simulator Eurace. Economics: The Open-Access, Open-Assessment E-Journal (2010).
- Economic forecasting with an agent-based model. European Economic Review (2023).
- Why do we need agent-based macroeconomics?. Review of Evolutionary Political Economy (2022).
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