Simulating Macroeconomic Expectations using LLM Agents

Jianhao Lin, Lexuan Sun and Yixin Yan

Papers from arXiv.org

Abstract: We introduce a novel framework for simulating macroeconomic expectation formation using Large Language Model-Empowered Agents (LLM Agents). By constructing thousands of LLM Agents equipped with modules for personal characteristics, prior expectations, and knowledge, we replicate a survey experiment involving households and experts on inflation and unemployment. Our results show that although the expectations and thoughts generated by LLM Agents are more homogeneous than those of human participants, they still effectively capture key heterogeneity across agents and the underlying drivers of expectation formation. Furthermore, a module-ablation exercise highlights the critical role of prior expectations in simulating such heterogeneity. This approach complements traditional survey methods and offers new insights into AI behavioral science in macroeconomic research.

Date: 2025-05, Revised 2025-06
New Economics Papers: this item is included in nep-ain and nep-mac
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