Modeling GDP fluctuations with agent-based model

Zhuang Chu, Biao Yang, Chang Yong Ha, Kwangwon Ahn

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)572-581
Number of pages10
JournalPhysica A: Statistical Mechanics and its Applications
Volume503
DOIs
Publication statusPublished - 2018 Aug 1

Fingerprint

Business Cycles
Agent-based Model
Analytical Solution
pendulums
economy
Pendulum
Fluctuations
Damped
cycles
Shock
shock
Modeling
Bayesian Estimation
Volatiles
calibrating
Gross
Comparative Analysis
Annual
Percentage
economics

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Condensed Matter Physics

Cite this

Chu, Zhuang ; Yang, Biao ; Ha, Chang Yong ; Ahn, Kwangwon. / Modeling GDP fluctuations with agent-based model. In: Physica A: Statistical Mechanics and its Applications. 2018 ; Vol. 503. pp. 572-581.
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Modeling GDP fluctuations with agent-based model. / Chu, Zhuang; Yang, Biao; Ha, Chang Yong; Ahn, Kwangwon.

In: Physica A: Statistical Mechanics and its Applications, Vol. 503, 01.08.2018, p. 572-581.

Research output: Contribution to journalArticle

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