An Agent-Based Macroeconomic Model with Endogenous Intertemporal Decision Rules

This paper uses an evolutionary algorithm to create endogenous intertemporal decision rules in an agent-based macroeconomic model. This approach addresses the Lucas critique in an agent-based model and links agent-based macroeconomic modeling to the standard DSGE framework. It can replicate the intertemporal decision rules given by the rational expectations solution to a representative agent growth model; at the same time, it is possible to model alternative information sets used to form the intertemporal decision rules. The dynamics in response to shocks depend in a non-trivial way on the interplay of expectations formation and the microstructure of the interaction between individual agents.