Economic Forecasting with an Agent-Based Model

49 Pages Posted: 18 Nov 2019 Last revised: 6 Nov 2020

See all articles by Sebastian Poledna

Sebastian Poledna

International Institute for Applied Systems Analysis (IIASA)

Michael Gregor Miess

Vienna University of Economics and Business

Cars H. Hommes

Government of Canada - Bank of Canada; CeNDEF, Amsterdam School of Economics, University of Amsterdam; Tinbergen Institute

Date Written: February 24, 2020

Abstract

We develop the first agent-based model (ABM) that can compete with and in the long run significantly outperform 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 sector accounts, input-output tables, government statistics, and census 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. In a recent application, we have used the detailed structure of the ABM to forecast the medium-run macroeconomic effects of lockdown measures taken in Austria to combat the COVID-19 crisis. Other potential applications of the model include stress-testing and predicting the effects of monetary or fiscal macroeconomic policies.

Keywords: agent-based models, behavioral macro, macroeconomic forecasting, micro data

JEL Classification: E70, E32, E37

Suggested Citation

Poledna, Sebastian and Miess, Michael Gregor and Hommes, Cars H., Economic Forecasting with an Agent-Based Model (February 24, 2020). Available at SSRN: https://ssrn.com/abstract=3484768 or http://dx.doi.org/10.2139/ssrn.3484768

Sebastian Poledna (Contact Author)

International Institute for Applied Systems Analysis (IIASA) ( email )

Schlossplatz 1
Laxenburg, A-2361
Austria

Michael Gregor Miess

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Cars H. Hommes

Government of Canada - Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

CeNDEF, Amsterdam School of Economics, University of Amsterdam ( email )

Roetersstraat 11
Amsterdam, NL-1018WB
Netherlands

HOME PAGE: http://https://www.uva.nl/en/profile/h/o/c.h.hommes/c.h.hommes.html

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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