Eurace Project (2006-2009)

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Macroeconomic policy design plays a fundamental role in social welfare and requires a coordinated application of economic policy measures, e.g., fiscal and monetary strategies, knowledge exchange, R&D incentives etc. Generally speaking, the interplay of such different measures is not completely understood. Different types of mainstream macroeconomic models typically restrict attention to specific policy areas and rely on highly abstract description of the economic environment and agents' decision processes. Agent-based macroeconomic models have the potential to provide a unified micro-founded framework for the analysis of measures in different policy areas. They allow to represent institutional details governing economic interactions and decision making as well as the differences in these details across regions. In Agent-based models heterogeneities with respect to the charactersitics of economic agents and also the heterogeneity of the distributions of charactersitics across regions can be adequately captured. Different time frames (short/medium/long-run) for policy effects can be distinguished  and the spatial structure of economies can be taken into account in a more thorough way than in alternative approaches to macroeconomic modelling. Accordingly, agent-based models have high potential to provide policy-makers with rich and empirically grounded models for the evaluation of economic policy measures.