Doyne Farmer - Macroeconomics From the Bottom Up
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Uploaded by INETeconomics on Aug 31, 2011
In 2006, the Fed asked its macroeconometric model what would happen if house prices dropped by 20%. The model projected the past into the future and said: "Not much." Well, the financial crisis proved it wrong. Meanwhile, DSGE models, the main alternative up to this date, do not feature financial institutions; "They are not even good enough to be wrong," says Doyne Farmer. That's why Farmer and his team are developing an agent-based model, of the housing market first and of the entire economy next, to mimic the current financial crisis. The team collects data on actual people to calibrate a rich model with millions of interacting agents. This is a bottom-up approach to macroeconomics -- this is new economic thinking.
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Very ambitious, but it must somehow account for the fat tail distribution that arises from herd psychology.
bfq3000 5 months ago
This is nucking futs.
dennyluan 5 months ago
This is very exciting!
Zero0nee 5 months ago
Good luck on your project, Doyne.
AndreasPhilippidis 5 months ago