Agent based-stock flow consistent macroeconomics: Towards a benchmark model

By Alessandro Caiani, Antoine G. Godin, Eugenio Caverzasi, Mauro Gallegati, Stephen Kinsella, Joseph E. Stiglitz. Journal of Economic Dynamics and Control, 2016

331 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/b8ac2aaed5efb167617bb08e59c3aa426c526146

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Citations in the corpus

Climate Change, Financial Stability and Monetary Policy (2018, background): “…the rate of employment since the growth rate of output is not necessarily the same with the labour-determined potential output.28 All these economic effects affect the stability of the financial system 27 For similar validation exercises see Assenza et al. (2015) and Caiani et al. (2016).”
From financial instability to green finance: the role of banking and credit market regulation in the Eurace model (2019, methodology): “…A non-exhaustive list could include the K+S model, see Dosi et al. (2010, 2013, 2015), the set of models developed by the Ancona research group (Caiani et al. (2015); Riccetti et al. (2015); Russo et al. (2016)), the CC-MABM (Assenza et al. (2015)), the Mark I CRISIS model (Klimek et al.…”
An agent-based stock-flow consistent model of the sustainable transition in the energy sector (2018, background): “, 2011a, 2012) and economic systems (Raberto et al., 2008; Dosi et al., 2010; Raberto et al., 2012; Caiani et al., 2016; Russo et al., 2016), is an alternative approach able to address shortcomings of IAMs because it provides a way for addressing out-of-equilibrium dynamics in economic systems (Farm”
Stock-Flow Consistent Macroeconomic Models: A Survey (2017, neutral): “Common specifications include a purely Wicksellian type of banking sector, where banks supply whatever loans are demanded (for example, this is the running assumption in most chapters of Godley and Lavoie [2007a]) or some kind of credit rationing (e.g., Le Heron and Mouakil 2008; Caiani et al. 2016)”
The effects of Labour Market Reforms upon Unemployment and Income Inequalities: an agent based model (2018, background): “…ABM’s considering decentralized labour markets and their impact on the macroeconomic conditions see Fagiolo et al. (2004), Dawid et al. (2008), Deissenberg et al. (2008), Seppecher (2012), Dawid et al. (2012, 2014), Riccetti et al. (2014) and Russo et al. (2015), and Caiani et al. (2015, 2016).”