Measuring Real Equilibrium Interest Rate: From the Linear Equation of the Taylor Rule to Agent - Based Model
Journal Title: Journal of Economics, Management and Trade - Year 2017, Vol 16, Issue 3
Abstract
The aim of this paper is to transform standard Taylor rule linear equation model into agent-based computational (ABC) model. ABC model addresses monetary macroeconomics as a complex evolving system of heterogenous agents whose interactions continuously change the structure of the system. Our ABC methodology extend the Taylor rule-based model with macroeconomic and global factors that account for the variability of the equilibrium interest rate and for the deviations of the actual federal funds rate from the interest rates implied by the Taylor rule. As a result we compared two models and identified that ABC model allows to better understand forward looking equilibrium interest rate dynamics comparatively to Taylor’s mathematically determined 2% steady state equilibrium interest rate.
Authors and Affiliations
Alexander Dedishchev
Keywords
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- EP ID EP320029
- DOI 10.9734/BJEMT/2017/31353
- Views 89
- Downloads 0
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