Keynes in the computer laboratory. an agent-based model with mec, mpc, lp

Abstract

The present paper aims at taking the core of Keynes's macroeconomics - as it is portrayed in the 1937's QJE paper - into the computer laboratory, in the spirit of a counterfactual history of economic thought. We design an agent-based model in which the principal role in determining economic dynamics is played by the three pillars of Keynesian economics, namely the Marginal Efficiency of Capital, the Marginal Propensity to Consume and the Liquidity Preference. The latter magnitudes are modelled with particular attention to their behavioural foundations. Indeed, in Keynes's thought, such behavioural foundations result greatly important in determining the development of the business cycle. Simulation results endorse this view, with our model being able to recreate economic fluctuations with interesting statistical properties. © Springer-Verlag Berlin Heidelberg 2009.