Interactive Macroeconomics: Stochastic Aggregate Dynamics with Heterogeneous and Interacting Agents

305 Pages·2016·5.07 MB·English

by  Corrado Di Guilmi

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Interactive Macroeconomics
One of the major topics in macroeconomic theory is the coordination
mechanism through which a large number of agents exchange goods in
decentralizedeconomies. Themainstreamtheoryofefficientmarketsfailsto
provide an internal coherent framework and rules out, by construction, the
interactionamongheterogeneousagents.
A rigorous micro-foundation for macro models can overcome this
limitationandprovidemorereliablepolicyprescriptions. Thisbookdevelops
an innovative approach to the analysis of agent based models. Interaction
between heterogeneous agents is analytically modelled by means of
stochastic dynamic aggregation techniques, based on the master equation
approach.
The book is divided into four parts: the first presents the stochastic
aggregationandmacro-dynamicsinferencemethods, basedonthestochastic
evolution of the microeconomic units; the second applies these inferential
techniques on macroeconomic agent-based models; the third provides
conclusions and stimulates further developments; the last part contains
technicalappendices.
This book offers a systematic and integrated treatment of original
concepts and tools, together with applications, for the development of an
alternative micro-foundation framework. In order to promote a widespread
adoptionamongtheprofessionandbygraduatestudents,everynon-standard
mathematicaltoolorconceptisintroducedwithasuitablelevelofdetail. All
the logical passages and calculations are explicit in order to provide a
self-contained treatment that does not require prior knowledge of the
technicalliterature.
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Corrado Di Guilmi. Senior Lecturer at the University of Technology
Sydney. His research interests include agent-based modelling, complex
systemtheoryandpost-Keynesianeconomics.
SimoneLandini. ResearcheratIRESPiemonte,Turin.Hisresearchinterests
include mathematical methods for social, economic and regional sciences,
politicalandfinancialeconomics,agentbasedmodelling.
MauroGallegati.ProfessorofAdvancedMacroeconomicsattheUniversita´
Politecnica delle Marche, Ancona. His research interests include
heterogeneous interacting agents, business fluctuations and, nonlinear
dynamics,modelsoffinancialfragility,andsustainableeconomics,economic
history,historyofeconomicanalysis,appliedeconomicsandeconophysics.
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Physics of Society: Econophysics and Sociophysics
This book series is aimed at introducing readers to the recent
developments in physics inspired modelling of economic and social
systems. Socio-economic systems are increasingly being identified as
‘interacting many-body dynamical systems’ very much similar to the
physical systems, studied over several centuries now. Econophysics and
sociophysics as interdisciplinary subjects view the dynamics of markets
and society in general as those of physical systems. This will be a series
of books written by eminent academicians, researchers and subject
experts in the field of physics, mathematics, finance, sociology,
managementandeconomics.
Thisnewseriesbringsoutresearchmonographsandcoursebooksuseful
forthestudentsandresearchersacrossdisciplines,bothfromphysicaland
socialsciencedisciplines,includingeconomics.
Series Editors:
Bikas K. Chakrabarti Mauro Gallegati
ProBfieksasso rK, .S Cahhaa kIrnasbtiaturttie of Nuclear Physics, ProMfeasusroor Gofa Ellecgoantoimics, Polytechnic
KoPlkroaftae,s sIonrd,i aSaha Institute of Nuclear Physics,UnPivroefresistsyo ro fo fM Eacrochneo,m Itiaclsy, Polytechnic
Kolkata, India University of Marche, Italy
Alan Kirman H. Eugene Stanley
Alan Kirman H. Eugene Stanley
Professor emeritus of Economics, William Fairfield Warren
Professor emeritus of Economics, William Fairfield Warren
University of AixMarseille III, Distinguished Professor Boston
University of AixMarseille III, Distinguished Professor Boston
Marseille, France University, Boston, USA
Marseille, France University, Boston, USA
Editorial Board Members:
Frédéric Abergel Hideaki Aoyama
Frédéric Abergel Hideaki Aoyama
Professor of Mathematics Centrale Supélec, Professor, Department of Physics, Kyoto
Professor of Mathematics Centrale Supélec, Professor, Department of Physics, Kyoto
Chatenay Malabry, France University, Kyoto, Japan
Chatenay Malabry, France University, Kyoto, Japan
Anirban Chakraborti Satya Ranjan Chakravarty
Anirban Chakraborti Satya Ranjan Chakravarty
Professor of Physics Dean, School Professor of Economics Indian
Professor of Physics Dean, School Professor of Economics Indian
of Computational and Integrative Statistical Institute, Kolkata, India
of Computational and Integrative Statistical Institute, Kolkata, India
Sciences, Jawaharlal Nehru
Sciences, Jawaharlal Nehru Shu-Heng Chen
University, New Delhi, India Shu-Heng Chen
University, New Delhi, India Professor of Economics and
Professor of Economics and
Arnab Chatterjee Computer Science Director,
Arnab Chatterjee Computer Science Director,
TCS Innovation Labs Delhi, AIECON Research Center, National
TCS Innovation Labs Delhi, AIECON Research Center, National
India Chengchi University, Taipei, Taiwan
India Chengchi University, Taipei, Taiwan
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Domenico DelliGatti Cars Hommes
Professor of Economics Catholic Professor of Economics Amsterdam
University, Milan, Italy School of Economics, University
of Amsterdam Director, Center for
Kausik Gangopadhyay
Nonlinear Dynamics in Economics
Professor of Economics Indian
and Finance (CeNDEF), Amsterdam,
Institute of Management,
Netherlands
Kozhikode, India
Giulia Iori
Taisei Kaizoji
Professor of Economics School of
Professor of Economics Department
Social Science, City University,
of Economics and Business,
London, United Kingdom
International Christian University,
Tokyo, Japan Kimmo Kaski
Professor of Physics Dean, School
János Kertész
of Science, Aalto University, Espoo, Finland
Professor of Physics Center for Network
Science, Central European University, Akira Namatame
Budapest, Hungary Professor of Computer Science and
Economics Department of Computer
Parongama Sen
Science,
Professor of Physics University of Calcutta,
National Defense Academy, Yokosuka,
Kolkata, India
Japan
Victor Yakovenko
Sitabhra Sinha
Professor of Physics University of
Professor of Physics Institute of
Maryland,
Mathematical Science, Chennai,
College Park, USA
India
Physics of Society: Published Titles
• Limit Order Books by Fre´de´ric Abergel, Marouane Anane, Anirban
Chakraborti,AymenJedidiandIoaneMuniToke
Physics of Society: Forthcoming Titles
• Macro-Econophysics: New Studies on Economic Networks and
Synchronization by Hideaki Aoyama, Yoshi Fujiwara, Yuichi Ikeda,
HiroshiIyetomi,WataruSoumaandHiroshiYoshikawa
• A Statistical Physics Perspective on Socio Economic Inequalities by
ArnabChatterjeeandVictorYakovenko
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Interactive Macroeconomics
Stochastic Aggregate Dynamics with Heterogeneous and
Interacting Agents
Corrado Di Guilmi
Simone Landini
Mauro Gallegati
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Tomyfamilyandfriends,fortheirsupport. Inparticulartomyfriend
Massimo,whocouldwriteafollowupofthisbookforallthetimesthatI
talkedtohimaboutit.
ToCarlChiarella,whohelpedmeunderstandingwhatIwasdoing.
ToK.P.,K.R.andF.Z.whoweresomehowthereatthetimeofwriting.
CDG.
Allamiafamiglia,amiocuginoStefano.
Agliamici,aManfred.
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Contents
Figures xiii
Tables xv
Preface xvii
1 Introduction
1.1 WhyareWeHere? 1
1.2 AggregationandInteraction 7
1.3 TheRoadAhead 12
1.4 StructureoftheBook 21
1.4.1 Threepossiblereadingpaths 22
Part I Methodological Notes and Tools
2 TheStateSpaceNotion
2.1 Introduction 29
2.2 TheStateSpaceNotion 31
3 TheMasterEquation
3.1 Introduction 46
3.2 TheMasterEquation: AGeneralIntroduction 49
3.2.1 Themechanicsinside 49
3.2.2 OnthemeaningoftheME 53
3.3 TheMarkovHypothesis 55
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x Contents
3.3.1 Thesimplestcase 55
3.3.2 Ageneralization 57
3.3.3 Stationarysolution 60
3.4 MomentsDynamics 62
3.4.1 Basicsonmoments 62
3.4.2 Exactdynamicestimators 64
3.4.3 Mean-fielddynamicestimators 66
3.5 ConcludingRemarks 67
Part II Applications to HIA Based Models
APremiseBeforeApplications 71
4 FinancialFragilityandMacroeconomicDynamicsI:Heterogeneity
andInteraction
4.1 Introduction 73
4.2 AFinancialFragilityABM 75
4.2.1 Goalofthemodel 76
4.2.2 Mainassumptions 78
4.2.3 Statesoffinancialsoundness 80
4.2.4 Themicroeconomicbehaviuor 81
4.2.5 Theoptimalprogramingrule 84
4.2.6 Macroeconomiceffectsandparametrization 88
4.3 MacroeconomicInferenceofStochasticDynamics 97
4.3.1 TheMEappliedtotheABM 97
4.3.2 TheMEtransitionratesfromtheABM 101
4.3.3 TheMEsolutiontotheABM 105
4.4 ResultsofMonteCarloSimulations 108
4.4.1 Thesimulationprocedure 108
4.4.2 Economicscenariosandinference 111
4.5 ConcludingRemarks 131
5 FinancialFragilityandMacroeconomicDynamicsII:Learning
5.1 Introduction 133
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