Agent-based macroeconomics and dynamic stochastic general equilibrium models: Where do we go from here?

Dilaver, Ozge; Jump, Robert; Levine, Paul

Abstract

© 2018 John Wiley & Sons Ltd. Agent-based computational economics (ACE) has been used for tackling major research questions in macroeconomics for at least two decades. This growing field positions itself as an alternative to dynamic stochastic general equilibrium (DSGE) models. In this paper, we provide a much needed review and synthesis of this literature and recent attempts to incorporate insights from ACE into DSGE models. We first review the arguments raised against DSGE in the macroeconomic ACE (macro ACE) literature, and then review existing macro ACE models, their explanatory power and empirical performance. We then turn to the literature on behavioural New Keynesian models that attempts to synthesize these two approaches to macroeconomic modelling by incorporating insights of ACE into DSGE modelling. Finally, we provide a thorough description of the internally rational New Keynesian model, and discuss how this promising line of research can progress.

• Journal Article Type: Article
• Acceptance Date: Oct 8, 2017
• Online Publication Date: May 14, 2020
• Publication Date: Sep 1, 2018
• Deposit Date: Nov 1, 2017
• Publicly Available Date: Apr 2, 2020
• Journal: Journal of Economic Surveys
• Print ISSN: 0950-0804
• Electronic ISSN: 1467-6419
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 32
• Issue: 4
• Pages: 1134-1159
• DOI: https://doi.org/10.1111/joes.12249
• Keywords: agent-based computational economics, agent-based macroeconomics, dynamic stochastic general equilibrium models, new Keynesian behavioural models
• Public URL: https://uwe-repository.worktribe.com/output/859881
• Publisher URL: https://doi.org/10.1111/joes.12249
• Additional Information: Additional Information : This is the peer reviewed version of the following article: Dilaver, O., Jump, R. and Levine, P. (2018) Agent-based macroeconomics and dynamic stochastic general equilibrium models: Where do we go from here? Journal of Economic Surveys, which has been published in final form at https://doi.org/10.1111/joes.12249. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
• Contract Date: Nov 1, 2017