Behavioral and complexity macroeconomics

Michael Roos
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Michael Roos: Ruhr-Universität Bochum, Germany

European Journal of Economics and Economic Policies: Intervention, 2017, vol. 14, issue 2, 186-199

Abstract: This paper sketches the history of behavioral macroeconomics and presents four current approaches in the literature: the ad hoc behavioral approach, partial behavioral macroeconomic models, experimental macroeconomics, and behavioral DSGE models. Much of this literature is still patchwork, with a focus on isolated aspects but little theoretical integration. I argue that integrating behavioral features into New Keynesian DSGE models is not convincing because of fundamental problems of the DSGE approach. A better way to use research from behavioral economics for more realistic macroeconomic models is to turn to complexity economics and agent-based modeling. Complexity economics and behavioral economics are linked in a very natural way, since both emphasize the direct interaction of heterogeneous agents that are boundedly rational. Behavioral and complexity macroeconomics is a promising new approach that might make mainstream macroeconomics more realistic and relevant again.

Keywords: bounded rationality; methodology; microfoundations; representative agents (search for similar items in EconPapers)
JEL-codes: B41 B50 C63 E03 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:elg:ejeepi:v:14:y:2017:i:2:p186-199

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