Agent Based-Stock Flow Consistent Macroeconomics: Towards a Benchmark Model

39 Pages Posted: 23 Sep 2015 Last revised: 26 Jun 2017

Alessandro Caiani

University of Pavia - Faculty of Economics

Antoine Godin

Centre d'économie de l'Université de Paris Nord (CEPN); Agence Française de Développement (AFD); Hans-Boeckler-Stiftung - Macroeconomic Policy Institute (IMK)

Eugenio Caverzasi

Department of Economic and Social Sciences, Marche Polytechnic University, Ancona; University of Limerick

Mauro Gallegati

Università Politecnica delle Marche - Faculty of Economics

Stephen Kinsella

University of Limerick

Joseph E. Stiglitz

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: June 6, 2016

Abstract

The global financial crisis has forced standard macroeconomics to re-examine the plausibility of its assumptions and the adequacy of the policy prescriptions flowing from those assumptions. We believe a renewal of macroeconomic thinking and macroeconomic modeling is possible by recognizing that our economies should be analyzed as complex adaptive systems. A coherent and exhaustive representation of the inter-linkages between the real and financial sides of the economy is vital as well. We propose a macroeconomic framework based on a novel combination of the Agent Based and Stock Flow Consistent approaches. This paper presents a benchmark model for this innovative approach. Our model depicts an economy with capital and credit in which different types of agents locally interact on different markets. We provide a detailed representation of individual agents’ balance sheets, ensuring the model accounting consistency at the micro, meso, and macro levels. We analyze the properties of our simulated economy under different configurations of agent heuristics, focusing in particular on the role of credit and investment. We explain in detail the logic followed to calibrate and validate the model. Results show that our benchmark model is able to reproduce many stylized facts observed in real world, thus representing a good starting point to test -- in the next works -- different economic policies and institutional setups. Finally, the relatively simple and flexible structure of the model opens up many possibilities for development of the framework along different lines, thus providing a fertile soil for new applications.

Keywords: Agent Based Macroeconomics, Stock Flow Consistent Models, Business Cycles, Crisis

JEL Classification: E03, E32, O30

Suggested Citation

Caiani, Alessandro and Godin, Antoine and Caverzasi, Eugenio and Gallegati, Mauro and Kinsella, Stephen and Stiglitz, Joseph E., Agent Based-Stock Flow Consistent Macroeconomics: Towards a Benchmark Model (June 6, 2016). Columbia Business School Research Paper No. 15-87. Available at SSRN: https://ssrn.com/abstract=2664125 or http://dx.doi.org/10.2139/ssrn.2664125

Alessandro Caiani (Contact Author)

University of Pavia - Faculty of Economics ( email )

Corso Strada Nuova, 65
27100 Pavia
Italy

Antoine Godin

Centre d'économie de l'Université de Paris Nord (CEPN) ( email )

UMR7115
Université Paris-Nord
Paris XIII
France

Agence Française de Développement (AFD) ( email )

5, rue Roland Barthes
Paris Cedex 12, 75598
France

Hans-Boeckler-Stiftung - Macroeconomic Policy Institute (IMK) ( email )

Hans-Böckler-Straße 39
40476 Düsseldorf
Germany

Eugenio Caverzasi

Department of Economic and Social Sciences, Marche Polytechnic University, Ancona ( email )

Piazzale Martelli 8
Ancona, 18039
Italy

University of Limerick ( email )

Limerick
Ireland

Mauro Gallegati

Università Politecnica delle Marche - Faculty of Economics ( email )

Piazzale Martelli, 8
60121 Ancona
Italy
++390712207188 (Phone)
++390712207102 (Fax)

Stephen Kinsella

University of Limerick ( email )

Limerick
Ireland
+35361233611 (Phone)
+35361330316 (Fax)

HOME PAGE: http://stephenkinsella.net

Joseph E. Stiglitz

Columbia Business School - Finance and Economics ( email )

3022 Broadway
814 Uris Hall
New York, NY 10027
United States
(212) 854-0671 (Phone)
(212) 662-8474 (Fax)

HOME PAGE: http://www.josephstiglitz.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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