Agent-Based Models and Economic Policy

Many of the factors responsible for the financial crisis (financial innovation and securitization; heterogeneity of agents, markets and regulatory frameworks) are, by and large, overlooked by standard macroeconomic models which have failed to forecast the advent of the crisis and are unable to restore economic growth. Agent-based and computational models depart from the representative agent paradigm, thereby introducing heterogeneity of agents’ characteristics and behavior, and allowing for markets that do not clear. These models are better equipped to analyze the salient features of out-of-equilibrium paths and provide novel insights on required economic policy during crises. This volume gathers contributions of leading scholars working on agent-based and computational models. It demonstrates how these models have reached the point where they can guide macro- and micro-economic policy.