Regional Policy Hints from Heterogeneous Agents Simulation

Abstract

Following the traditional approach to decision theory there is a strong difficulty to obtain policy hints for complex systems. Vice versa, the study of complex systems supplies powerful instruments that capture useful information on the behaviour of economic systems. This difficulty is enhanced when we are interested in differential regional effects. In fact, for complex systems, even for aggregate analysis, results will differ deeply for each simulation. The literature has shown how we could obtain policy hints for this kind of systems. Here, we will extend this methodology to the case of differential regional effects. The analysis will be based on a New-Keynesian microfoundated model with Heterogeneous Agents proposed by Salzano (2005). It will be developed in two directions: a) obtaining better models of differential regional policy effect; b) obtaining policy suggestions for differential regional effects. We will compare the results of our scheme against the traditional results.