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B. Rengs, M. Scholz-Wäckerle:
"An Agent-Based Model of Artificial Political Economies in Economic and Monetary Unions";
Talk: EAEPE 25th Conference 2013, Paris; 2013-11-06 - 2013-11-10.

We present a highly stylized agent-based computational model (ABM) of an artificial economic and monetary union comprising of a small number of interacting countries. Contrary to other current macroeconomic ABM models, it focuses on the relations/consequences of credit-financed economies (private indebtedness, highly leveraged firms and sovereign debt), conspicuous consumption within and across borders and a monetary and economic union of individual countries. The model includes a number of boundedly rational agents of the following types: a central bank, states & governments, banks, firms and households. Firms and households interact on a labor market and on two goods markets - a market for regular consumption goods and a market for status goods. Production requires a fixed combination of labor and capital input at the same time in both cases. Firms and banks interact on a credit market, and banks interact with each other on an interbank market. States (governments) collect taxes and use it to finance public goods and to provide unemployment subsidies. The government issues bonds to finance sovereign debt that exceeds available funds. The central bank acts as a lender of last resort and applies different (conventional pre-crisis monetary) policies to achieve economic policy target(s). Firms, banks and states face the problem of increasing interest rates, when their economic outlook worsens, thus suffering from trend reinforcement. Households can be in a number of different relations: (a) employed by a firm, bank, state, (b) unemployed receiving subsides from the state or (c) be capitalistic private owners of a firm or bank with full agency. These capitalistic owner households form upper classes and are the target of the status imitating behavior within and across borders. This leads on the one hand to worker households imitating their consumption behavior and upper class owners themselves imitating the behavior of foreign upper classes in economically more successful countries on the other hand.