Journal of Economic Literature
ISSN 0022-0515 (Print) | ISSN 2328-8175 (Online)
Agent-Based Modeling in Economics and Finance: Past, Present, and Future
Journal of Economic Literature
vol. 63,
no. 1, March 2025
(pp. 197–287)
Abstract
Agent-based modeling (ABM) is a novel computational methodology for representing the behavior of individuals in order to study social phenomena. Its use is rapidly growing in many fields. We review ABM in economics and finance and highlight how it can be used to relax conventional assumptions in standard economic models. ABM has enriched our understanding of markets, industrial organization, labor, macro, development, public policy, and environmental economics. In financial markets, substantial accomplishments include understanding clustered volatility, market impact, systemic risk, and housing markets. We present a vision for how ABMs might be used in the future to build more realistic models of the economy and review some of the hurdles that must be overcome to achieve this.Citation
Axtell, Robert L., and J. Doyne Farmer. 2025. "Agent-Based Modeling in Economics and Finance: Past, Present, and Future." Journal of Economic Literature 63 (1): 197–287. DOI: 10.1257/jel.20221319Additional Materials
JEL Classification
- C63 Computational Techniques; Simulation Modeling
- D00 Microeconomics: General
- E00 Macroeconomics and Monetary Economics: General
- G00 Financial Economics: General