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Book Description

Handbook of Computational Economics: Heterogeneous Agent Modeling, Volume Four, focuses on heterogeneous agent models, emphasizing recent advances in macroeconomics (including DSGE), finance, empirical validation and experiments, networks and related applications. Capturing the advances made since the publication of Volume Two (Tesfatsion & Judd, 2006), it provides high-level literature with sections devoted to Macroeconomics, Finance, Empirical Validation and Experiments, Networks, and other applications, including Innovation Diffusion in Heterogeneous Populations, Market Design and Electricity Markets, and a final section on Perspectives on Heterogeneity.

  • Helps readers fully understand the dynamic properties of realistically rendered economic systems
  • Emphasizes detailed specifications of structural conditions, institutional arrangements and behavioral dispositions
  • Provides broad assessments that can lead researchers to recognize new synergies and opportunities

Table of Contents

  1. Cover image
  2. Title page
  3. Table of Contents
  4. Copyright
  5. Contributors
  6. Introduction to the Series
  7. Introduction to the Handbook of Computational Economics, Volume 4, Heterogeneous Agent Modeling
  8. Part 1: Macroeconomics
    1. Chapter 1: Heterogeneous Expectations and Micro-Foundations in Macroeconomics
      1. Abstract
      2. 1. Introduction
      3. 2. Expectations Operators and Bounded Rationality
      4. 3. Equilibria with Heterogeneous Expectations
      5. 4. Asset-Pricing Applications
      6. 5. Monetary Applications
      7. 6. DSGE Applications
      8. 7. Conclusion
      9. References
    2. Chapter 2: Agent-Based Macroeconomics
      1. Abstract
      2. 1. Introduction
      3. 2. Design of Agent-Based Macroeconomic Models
      4. 3. Comparison of Existing Agent-Based Macroeconomic Models
      5. 4. Policy Analysis
      6. 5. Conclusions and Outlook
      7. Appendix A. Summary of Selected Agent-Based Macroeconomic Models
      8. Appendix B. List of Symbols
      9. References
    3. Chapter 3: Endogenous Firm Dynamics and Labor Flows via Heterogeneous Agents
      1. Abstract
      2. 1. Introduction
      3. 2. Dynamics of Team Production
      4. 3. From One Team to Six Million Firms, Computationally
      5. 4. Model Variations: Sensitivity and Robustness
      6. 5. Summary and Conclusions
      7. Appendix A. Generalized Preference Specifications
      8. Appendix B. Generalized Compensation and Nash Stability
      9. Appendix C. Sensitivity to ‘Sticky’ Effort Adjustment
      10. Appendix D. Extension: Stabilizing Effect of Agent Loyalty
      11. Appendix E. Extension: Hiring
      12. Appendix F. Extension: Effort Monitoring and Worker Termination
      13. References
    4. Chapter 4: Heterogeneous Agents in the Macroeconomy: Reduced-Heterogeneity Representations
      1. Abstract
      2. 1. Introduction
      3. 2. The Economic Problem and Notations
      4. 3. No-Trade Equilibria
      5. 4. Small-Heterogeneity Models
      6. 5. Truncated-History Models
      7. 6. Optimal Policies
      8. 7. Comparison with Other Approach Using Perturbation Methods
      9. 8. Heterogeneous Expectations
      10. 9. Concluding Remarks
      11. References
  9. Part 2: Finance
    1. Chapter 5: Heterogeneous Agent Models in Finance
      1. Abstract
      2. 1. Introduction
      3. 2. HAMs of Single Asset Market in Discrete-Time
      4. 3. HAMs of Single Asset Market in Continuous-Time
      5. 4. HAMs of Multi-Asset Markets and Financial Market Interlinkages
      6. 5. HAMs and House Price Dynamics
      7. 6. HAMs and Market Microstructure
      8. 7. Conclusion and Future Research
      9. References
    2. Chapter 6: Models of Financial Stability and Their Application in Stress Tests
      1. Abstract
      2. 1. Introduction
      3. 2. Two Approaches to Modeling Systemic Risk
      4. 3. A View of the Financial System
      5. 4. Leverage and Endogenous Dynamics in a Financial System
      6. 5. Contagion in Financial Networks
      7. 6. From Models to Policy: Stress Tests
      8. 7. Microprudential Stress Tests
      9. 8. Macroprudential Stress Tests
      10. 9. The Future of System-Wide Stress Tests
      11. 10. Conclusion
      12. References
    3. Chapter 7: Agent-Based Models for Market Impact and Volatility
      1. Abstract
      2. 1. Introduction
      3. 2. The Statistics of Price Changes: A Short Overview
      4. 3. The Square-Root Impact Law
      5. 4. The Santa-Fe “Zero-Intelligence” Model
      6. 5. An Improved Model for the Dynamics of Liquidity
      7. 6. Walrasian Auctions and the Square-Root Law
      8. 7. The Information Content of Prices
      9. 8. Conclusions and Open Problems
      10. Acknowledgements
      11. References
    4. Chapter 8: Empirical Validation of Agent-Based Models
      1. Abstract
      2. 1. Introduction
      3. 2. Estimation of Agent-Based Models in Other Fields
      4. 3. Reduced Form Models
      5. 4. Estimation Methods
      6. 5. Applications of Agent-Based Models
      7. 6. Conclusion
      8. References
  10. Part 3: Experiments
    1. Chapter 9: Heterogeneous Agent Modeling: Experimental Evidence
      1. Abstract
      2. 1. Introduction
      3. 2. Heterogeneity and Bounded Rationality in Decision Making
      4. 3. Heterogeneity and Monetary Policy
      5. 4. Heterogeneity in Equilibrium Selection
      6. 5. Conclusion
      7. References
    2. Chapter 10: Levels of Reasoning in Keynesian Beauty Contests: A Generative Framework
      1. Abstract
      2. 1. Introduction
      3. 2. An Overview of Experimental Economics
      4. 3. The Keynesian Beauty Contest: A Generative Framework for Archetypal Games in Economics
      5. 4. Behavioral Regularities in BC-Experiments and Level-k
      6. 5. Elicitation Methods
      7. 6. Discussion
      8. References
  11. Part 4: Networks
    1. Chapter 11: Empirical Analyses of Networks in Finance
      1. Abstract
      2. 1. Introduction
      3. 2. A Brief Historical Perspective About the Use of Network Science in Economics and Finance
      4. 3. Network Approaches to Financial Stability: The Interbank Market
      5. 4. Networks and Information Filtering
      6. 5. Indirect Channels of Contagion
      7. 6. Concluding Remarks
      8. Acknowledgements
      9. Appendix A. Basic Concepts in Network Science
      10. Appendix B. Econometrics Systemic Risk Measure
      11. References
    2. Chapter 12: Heterogeneity and Networks
      1. Abstract
      2. 1. Introduction and Overview
      3. 2. Networks: Terminology
      4. 3. The Theory of Network Formation
      5. 4. Networks and Individual Behavior
      6. 5. Combining Actions and Link Formation
      7. 6. Concluding Remarks
      8. References
  12. Part 5: Other Applications
    1. Chapter 13: Electric Power Markets in Transition: Agent-Based Modeling Tools for Transactive Energy Support
      1. Abstract
      2. 1. Introduction
      3. 2. Agent-Based Computational Economics: Overview
      4. 3. Early ACE Research on Electric Power Systems
      5. 4. Transactive Energy Systems Research: Overview
      6. 5. ACE Support for TES Research on Demand Response
      7. 6. ACE Support for TES Research on Contract Design
      8. 7. Conclusion
      9. Acknowledgements
      10. References
  13. Part 6: Perspectives on Heterogeneity
    1. Chapter 14: Modeling a Heterogeneous World
      1. Abstract
      2. 1. Heterogeneity and Standard Economics
      3. 2. Heterogeneity in Microeconomics: Fish Markets
      4. 3. Heterogeneity in Financial Markets: The Implications of a Volatility Shock
      5. 4. Heterogeneity in the Macro-Financial System
      6. 5. Conclusion
      7. References
  14. Index
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