Agent-Based Modeling in Economics and Finance: Past, Present, and Future

J. Farmer and Robert L. Axtell

INET Oxford Working Papers from Institute for New Economic Thinking at the Oxford Martin School, University of Oxford

Abstract: Agent-based modeling (ABM) is a novel computational methodology for representing the behavior of individuals in order to study social phenomena. Its use is rapidly growing in many fields. We review ABM in economics and finance and highlight how it can be used to relax conventional assumptions in standard economic models. In economics, ABM has enriched our understanding of markets, industrial organization, labor, macro, development, environmental and resource economics, as well as policy. In financial markets, substantial accomplishments include understanding clustered volatility, market impact, systemic risk and housing markets. We present a vision for how ABMs might be used in the future to build more realistic models of the economy and review some of hurdles that must be overcome to achieve this.

Keywords: agent-based computational economics; multi-agent systems; agent-based modeling and simulation; distributed systems (search for similar items in EconPapers)
JEL-codes: C00 C63 C69 D00 E00 G00 (search for similar items in EconPapers)
Pages: 96 pages
Date: 2022-06
New Economics Papers: this item is included in nep-ban, nep-cmp, nep-evo and nep-hme
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Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:amz:wpaper:2022-10

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