Monetary policy experiments in an agent-based model with financial frictions

Domenico Delli Gatti, Saul Desiderio

Research output: Contribution to journalArticlepeer-review

21 Citations (Scopus)

Abstract

Macroeconomic agent based models have been around for at least a decade, and they have been remarkably successful in replicating many empirical “stylized facts”. Only a handful of papers, however, has explored the effects of monetary policy. In this paper we present an agent-based macroeconomic model where the interplay between credit market conditions and firms’ balance sheets is key in the determination of endogenous fluctuations. We use the model as a simulation platform by which we perform several experiments of monetary policy. Simulations showed a clear nonneutrality of monetary policy, which finds its transmission mechanism in the credit channel. Besides, we also evaluated the performance of a monetary Authority whose reaction function was modelled according to a standard Taylor rule, which turns out to be quite successful as an effective macro-stabilization tool.
Original languageEnglish
Pages (from-to)N/A-N/A
Number of pages22
JournalJournal of Economic Interaction and Coordination
Volume2015
DOIs
Publication statusPublished - 2015

Keywords

  • AGENT BASED MODELS

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