Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/66136
Authors: 
Westerhoff, Frank
Franke, Reiner
Year of Publication: 
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

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