No Man Is an Island: The Impact of Heterogeneity and Local Interactions on Macroeconomic Dynamics
Mauro Napoletano () and
LEM Papers Series from Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy
We develop an agent-based model in which heterogeneous firms and households interact in labor and good markets according to centralized or decentralized search and matching protocols. As the model has a deterministic backbone and a full-employment equilibrium, it can be directly compared to Dynamic Stochastic General Equilibrium (DSGE) models. We study the effects of negative productivity shocks by way of impulse-response functions (IRF). Simulation results show that when search and matching are centralized, the economy is always able to return to the full employment equilibrium and IRFs are similar to those generated by DSGE models. However, when search and matching are local, coordination failures emerge and the economy persistently deviates from full employment. Moreover, agents display persistent heterogeneity. Our results suggest that macroeconomic models should explicitly account for agents' heterogeneity and direct interactions.
Keywords: Agent-Based Model; Local Interactions; Heterogeneous Agents; DSGE Model (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Journal Article: No man is an Island: The impact of heterogeneity and local interactions on macroeconomic dynamics (2018)
Working Paper: No man is an island: the impact of heterogeneity and local interactions on macroeconomics dynamics (2018)
Working Paper: No man is an island: the Impact of Heterogeneity and local interactions on Macroeconomic Dynamics (2016)
Working Paper: No Man is an Island: The Impact of Heterogeneity and Local Interactions on Macroeconomic Dynamics (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ssa:lemwps:2016/24
Access Statistics for this paper
More papers in LEM Papers Series from Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy Contact information at EDIRC.
Bibliographic data for series maintained by ().