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Béatrice CHERRIER (CREST), “The many origins of heterogeneous agent models in macroeconomics”

December 6, 2021 @ 12:15 pm - 1:30 pm

The Macroeconomics Seminar:
Time: 12:15 pm – 13:30 pm
Date:06th of December  2021

Room : 1003

Béatrice CHERRIER (CREST), “The many origins of heterogeneous agent models in macroeconomics”

Abstract : In this paper, we intend to trace the origins of those heterogeneous agent models that are increasingly presented as one of the most promising responses to those shortcomings of macroeconomics models highlighted by the great financial crisis. We show that many if not most of the graduate students trained at Minnesota in the 1980s and early 1990s, in particular by Ed Prescott and Neil Wallace, were already developing models that incorporated some kind of heterogeneity. We explain that some the architects of representative agent macroeconomic models immediately sought to move to heterogeneity, so as to match stylized facts better, evaluate the welfare costs of business cycles, or discuss the consequences of restrictions to market participation. We document distinct ‘heterogeneity’ traditions in growth theory around the same time. We finally look and the broader picture, and we document how the relationships between heterogeneous individual behavior and aggregates, has been a longstanding concern in the history of macroeconomics since the 1930s. So-called “explicit microfoundations” and “heterogeneous agent models” got separate names as representative agent modeling took off, but other traditions aimed at studying aggregation issues developed differently in other communities, for instance in the UK under the leadership of Terence Gorman, Angus Deaton and John Muellbauer.

Joint work : Aurélien Saidi (Université Paris X Nanterre)

Jean-Baptiste MICHAU (Polytechnique-CREST)