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Title:Agent-based models for economic policy design: Two illustrative examples PDF Logo
Authors:Westerhoff, Frank
Franke, Reiner
Issue Date:2012
Series/Report no.:BERG Working Paper Series 88
Abstract:With the help of two examples, we illustrate the usefulness of agent-based models as a tool for economic policy design. In our first example, we apply a financial market model in which the order flow of speculators, relying on technical and fundamental analysis, generates intricate price dynamics. In our second example, we apply a Keynesian-type goods market model in which the investment behavior of firms, relying on extrapolative and regressive predictors, generates complex business cycles. We add a central authority to these two setups and explore the impact of simple intervention strategies on the model dynamics. Based on these experiments, we conclude that agent-based models may help us to understand how markets function and to evaluate the effectiveness of various stabilization policies.
Subjects:Agent-based models
Economic policy design
Financial markets
Goods markets
Simulation analysis
JEL:C63
D84
E32
G12
ISBN:978-3-943153-02-6
Document Type:Working Paper
Appears in Collections:BERG Working Paper Series, Universität Bamberg

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