The EURACE macroeconomic model and simulator

Abstract

The paper presents the main modelling features of the Eurace agent-based macroeconomic simulator. Eurace is a large-scale agent-based model and simulator representing a fully integrated macroeconomy consisting of three economic spheres: the real sphere (consumption goods, investment goods, and labour markets), the financial sphere (credit and financial markets), and the public sector (Government and Central Bank). Following the agent-based approach, Eurace economic agents are characterized by bounded rationality and adaptive behavior as well as pairwise interactions in decentralized markets. The balance-sheet approach and the stock flow consistency checks has been followed as a modeling paradigm, A set of computational results realized by the simulator has been also presented. In particular, results show the real effects on the Eurace economy of the dynamics of monetary aggregates, i.e., endogenous credit money supplied by commercial banks as loans to firms and fiat money created by the central bank by means of quantitative easing. Generally speaking, a quantity easing monetary policy coupled with a loose fiscal policy has been shown to generally provide better macroeconomic performance in terms of real variables, despite higher price and wage inflation rates. Computational results also show the emergence of endogenous business cycles which are mainly due to the interplay between the real economic activity and its financing through the credit market.