Economic forecasting with an agent-based model

Poledna, Sebastian; Miess, MichaelORCID: https://orcid.org/0000-0003-2564-3208; Hommes, Cars and Rabitsch, Katrin (2023) Economic forecasting with an agent-based model. European Economic Review, 151, 104306. https://doi.org/10.1016/j.euroecorev.2022.104306

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Abstract

We develop the first agent-based model (ABM) that can compete with benchmark VAR and DSGE models in out-of-sample forecasting of macro variables. Our ABM for a small open economy uses micro and macro data from national accounts, sector accounts, input–output tables, government statistics, and census and business demography data. The model incorporates all economic activities as classified by the European System of Accounts (ESA 2010) and includes all economic sectors populated with millions of heterogeneous agents. In addition to being a competitive model framework for forecasts of aggregate variables, the detailed structure of the ABM allows for a breakdown into sector-level forecasts. Using this detailed structure, we demonstrate the ABM by forecasting the medium-run macroeconomic effects of lockdown measures taken in Austria to combat the COVID-19 pandemic. Potential applications of the model include stress-testing and predicting the effects of monetary or fiscal macroeconomic policies.

Item Type: Article in Academic Journal
Additional Information (public): Supplementary material see related URL.
Keywords: Agent-based models, Behavioural macro, Macroeconomic forecasting, Micro data
Funders: FFG, OeNB
Classification Codes (e.g. JEL): E70, E32, E37
Research Units: Current Research Groups > Macroeconomics and Business Cycles
Related URLs:
Date Deposited: 18 Jan 2023 12:59
Last Modified: 25 Oct 2023 12:12
DOI: 10.1016/j.euroecorev.2022.104306
ISSN: 0014-2921
URI: https://irihs.ihs.ac.at/id/eprint/6453

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