From agent-based models to artificial economies

Abstract

The aim of this thesis is to propose and illustrate an alternative approach to economic modeling and policy design that is grounded in the innovative field of agent-based computational economics (ACE). The recent crisis pointed out the fundamental role played by macroeconomic policy design in order to preserve social welfare, and the consequent necessity of understanding the effects of coordinated policy measures on the economic system. Classic approaches to macroeconomic modeling, mainly represented by dynamic stochastic general equilibrium models, have been recently criticized for they difficulties in explaining many economic phenomena. The absence of interaction among heterogeneous agents, along with their strong rationality, are two of the main of criticisms that emerged, among others. Actually, decentralized market economies consist of large numbers of economic agents involved in local interactions and the aggregated macroeconomic trends should be considered as the result of these local interactions. The approach of agent-based computational economics consists in designing economic models able to reproduce the complicated dynamics of recurrent chains connecting agent behaviors, interaction networks, and to explain the global outcomes emerging from the bottom-up. The work presented in this thesis tries to understand the feedback between the microstructure of the economic model and the macrostructure of policy design, investigating the effects of different policy measures on agents behaviors and interactions. In particular, the attention is focused on modeling the relation between the financial and the real sides of the economy, linking the financial markets and the credit sector to the markets of goods and labor. The model complexity is increasing with the different chapters. The agent-based models presented in the first part evolve to a more complex object in the second part, becoming a sort of complete ``artificial economy''. The problems tackled in the thesis are various and go from the investigation of the equity premium puzzle, to study of the effects of classic monetary policy rules (as the Taylor rule) or to the study of the macroeconomic implications of bank's capital requirement or quantitative easing.