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Title:Agent-based financial markets and New Keynesian macroeconomics: A synthesis PDF Logo
Authors:Lengnick, Matthias
Wohltmann, Hans-Werner
Issue Date:2010
Series/Report no.:Economics working paper / Christian-Albrechts-Universität Kiel, Department of Economics 2010,10
Abstract:We combine a simple agent-based model of financial markets with a standard New Keynesian macroeconomic model via two straightforward channels. The result is a macroeconomic model that allows for the endogenous development of stock price bubbles. Even with such a simplistic comprehensive model, we can show that the behavioral foundations of the stock market exert important influence on the macroeconomy, e.g. they change the impulse-response functions of macroeconomic variables significantly. We also analyze financial market transaction taxes as well as asset price bubble deflating monetary policy, and find that both can be used to reduce volatility and distortion of the macroeconomic aggregates.
Subjects:agent-based financial markets
New Keynesian macroeconomics
stock market
transaction tax
Taylor rule
JEL:E0
E52
G12
G18
Document Type:Working Paper
Appears in Collections:Economics Working Papers, Department of Economics, CAU Kiel

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