Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/300179 
Year of Publication: 
2024
Series/Report no.: 
IES Working Paper No. 22/2024
Publisher: 
Charles University in Prague, Institute of Economic Studies (IES), Prague
Abstract: 
Financial-macroeconomic agent-based models offer a promising avenue for understanding complex economic interactions, but their use is hindered by challenging empirical estimation. Our paper addresses this gap by constructing a stylized integrated model and estimating its core parameters using US data from 1954 to 2022. To tackle econometric obstacles, including mixed data frequencies, we adapt the simulated method of moments. We then focus on three key interaction channels. The stock market influences the real sector through the wealth effect, which boosts current consumption, and the cost effect, which lowers financing costs for firms. Conversely, the real economy impacts the stock market via the price misperception effect, where economic conditions help approximate the fundamental value of stocks. Our results provide strong statistical support for all three channels, offering novel empirical insights into critical dynamics between the two sectors of the economy.
Subjects: 
integrated agent-based model
behavioral finance and macroeconomics
bounded rationality
heuristic switching
simulated method of moments
JEL: 
C13
C53
E12
G41
E71
Document Type: 
Working Paper

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