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Article overview
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Tipping points in macroeconomic Agent-Based models | | Stanislao Gualdi
; Marco Tarzia
; Francesco Zamponi
; Jean-Philippe Bouchaud
; | | Date: |
11 Jul 2013 | | Abstract: | The aim of this work is to explore the possible types of phenomena that
simple macroeconomic Agent-Based models (ABM) can reproduce. Our motivation is
to understand the large macro-economic fluctuations observed in the "Mark I"
ABM devised by D. Delli Gatti and collaborators. Our major finding is the
existence of a first order (discontinuous) phase transition between a "good
economy" where unemployment is low, and a "bad economy" where unemployment is
high. We show that this transition is robust against many modifications of the
model, and is induced by an asymmetry between the rate of hiring and the rate
of firing of the firms. This asymmetry is induced, in Mark I, by the interest
rate. As the interest rate increases, the firms become more and more reluctant
to take further loans. The unemployment level remains small until a tipping
point beyond which the economy suddenly collapses. If the parameters are such
that the system is close to this transition, any small fluctuation is amplified
as the system jumps between the two equilibria. We have also explored several
natural extensions. One is to allow this hiring/firing propensity to depend on
the financial fragility of firms. Quite interestingly, we find that in this
case, the above transition survives but becomes second order. We also studied
simple wage policies and confidence feedback effects, whereby higher
unemployment increases the saving propensity of households. We observe several
interesting effects, such as the appearance of acute endogenous crises, during
which the unemployment rate shoots up before the economy recovers. We end the
paper with general comments on the usefulness of ABMs to model macroeconomic
phenomena, in particular in view of the time needed to reach a steady state. | | Source: | arXiv, 1307.5319 | | Services: | Forum | Review | PDF | Favorites | |
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