Modeling GDP fluctuations with agent-based model

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This paper offers a new approach to calibrating parameters of an agent-based model proposed by Ormerod (2002) and conducts a comparative analysis of the US and Chinese business cycles for the period 1993–2014 using annual percentage changes in real gross domestic product. Depending on the underlying conditions of the system, the agent-based model is transformed to a damped pendulum, or a forced damped pendulum, through which we get the analytical solutions. These analytical solutions stipulate the speed of recovery from external shocks and the length of a business cycle. After pinning down two parameters in the analytical solutions, we calibrate the model using the Bayesian estimation technique. Our calibration approach captures the fundamental features of the economic fluctuations reasonably well. In particular, we find that the Chinese economy is more volatile and less persistent than the US economy: China has a shorter average duration of business cycles and recovers faster from external shocks; and the two countries move synchronously. © 2018 Elsevier B.V.
Publisher
ELSEVIER SCIENCE BV
Issue Date
2018-08
Language
English
Article Type
Article
Citation

Physica A-statistical mechanics and its applications, v.503, pp.572 - 581

ISSN
0378-4371
DOI
10.1016/j.physa.2018.02.019
URI
http://hdl.handle.net/10203/248771
Appears in Collection
RIMS Journal Papers
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