Bayesian estimation of agent-based models via adaptive particle Markov chain Monte Carlo

Thomas Lux

No 2020-01, Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics

Abstract: Over the last decade, agent-based models in economics have reached a state of maturity that brought the tasks of statistical inference and goodness-of-fit of such models on the agenda of the research community. While most available papers have pursued a frequentist approach adopting either likelihood-based algorithms or simulated moment estimators, here we explore Bayesian estimation using a Markov chain Monte Carlo approach (MCMC). One major problem in the design of MCMC estimators is finding a parametrization that leads to a reasonable acceptance probability for new draws from the proposal density. With agent-based models the appropriate choice of the proposal density and its parameters becomes even more complex since such models often require a numerical approximation of the likelihood. This brings in additional factors affecting the acceptance rate as it will also depend on the approximation error of the likelihood. In this paper, we take advantage of a number of recent innovations in MCMC: We combine Particle Filter Markov Chain Monte Carlo (PMCMC) as proposed by Andrieu et al. (2010) with adaptive choice of the proposal distribution and delayed rejection in order to identify an appropriate design of the MCMC estimator. We illustrate the methodology using two well-known behavioral asset pricing models.

Keywords: Agents-based models; Makov chain Monte Carlo; particle filter (search for similar items in EconPapers)
JEL-codes: C15 C58 G12 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-ecm, nep-hme and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cauewp:202001

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