Economic Forecasting with an Agent-Based Model
63 Pages Posted: 18 Nov 2019
Date Written: November 11, 2019
We develop the first agent-based model (ABM) that can compete with benchmark VAR and DSGE models in out-of-sample forecasting of macro variables. Our ABM for a small open economy uses micro and macro data from national and sector accounts, input-output tables, government statistics, census and business demography data. The model incorporates all economic activities as classified by the European System of Accounts as heterogeneous agents. The detailed structure of the ABM allows for a breakdown into sector level forecasts. Potential applications of the model include stress-testing and predicting the effects of changes in monetary, fiscal, or other macroeconomic policies.
Keywords: agent-based models, behavioral macro, macroeconomic forecasting, micro data
JEL Classification: E70, E32, E37
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