Ramon Marimon

Money as a medium of exchange in an economy with artificially intelligent agents

Abstract We study the exchange economies of Kiyotaki and Wright (1989) in which agents must use a commodity or fiat money as a medium of exchange if trade is to occur. Our agents are artificially intelligent and are modeled as using classifier systems to make decisions. In the assignment of credit within the classifier systems, we introduce some innovations designed to study sequential decision problems in a multi-agent environment. For most economies that we have simulated, trading and consumption patterns converge to a stationary Nash equilibrium even if agents start with random rules. In economies with multiple equilibria, the only equilibrium that emerges in our simulations is the one in which goods with low storage costs play the role of medium of exchange (i.e., the ‘fundamental equilibrium’ of Kiyotaki and Wright).

Unemployment vs. Mismatch of Talents: Reconsidering Unemployment Benefits

We develop an equilibrium search-matching model with risk-neutral agents and two-sided ex-ante heterogeneity Unemployment insurance has the standard effect of reducing employment, but also helps workers to get a suitable job. The predictions of our simple model are consistent with the contrasting performance of the labor market in Europe and US in terms of unemployment, productivity growth and wage inequality. To show this, we construct two fictitious economies with calibrated parameters which only differ by the degree of unemployment insurance and assume that they are hit by a common technological shock which enhances the importance of mismatch. This shock reduces the proportion of jobs which workers regard as acceptable in the economy with unemployment insurance (Europe). As a result, unemployment doubles in this economy. In the laissez-faire economy (US), unemployment remains constant, but wage inequality increases more and productivity grows less due to larger mismatch. The model can be used to address a number of normative issues.

Computational Methods for the Study of Dynamic Economies

From the Publisher: Macroeconomics increasingly uses stochastic dynamic general equilibrium models to understand theoretical and policy issues. Unless very strong assumptions are made, understanding the properties of particular models requires solving the model using a computer. This volume brings together leading contributors in the field who explain in detail how to implement the computational techniques needed to solve dynamic economics models. A broad spread of techniques are covered, and their application in a wide range of subjects discussed. The book provides the basics of a toolkit which researchers and graduate students can use to solve and analyse their own theoretical models.

Communication, commitment and growth

We study the effect on the growth of an economy of alternative financing opportunities in a stochastic growth model with incentive constraints. Efficient accumulation mechanisms are designed and computed for economies that differ in their incentive structure. We show that when borrowing is subject to information constraints, there is a computable efficient transfer mechanism that does not affect capital accumulation and investment patterns, even though consumption patterns and the distribution of wealth are affected. In contrast, enforcement constraints can severely reduce the outside financing opportunities and affect investment patterns and economic growth. We adapt numerical algorithms for obtaining numerical solutions of these models.

Indeterminacy of equilibria in a hyperinflationary world: Experimental evidence

The authors design and study an OLG experimental economy where the government finances a fixed real deficit through seigniorage. The economy has continua of nonstationary rational expectations equilibria and two stationary rational expectations equilibria. The authors do not observe nonstationary rational expectations paths. Observed paths tend to converge close to, or somewhat below, the low inflation stationary state. The adaptive learning hypothesis is consistent with the data in selecting the low inflation stationary state rational expectations equilibrium as a long-run stationary equilibrium. Nevertheless, simple adaptive learning models do not capture the market uncertainty or the biases observed in the data. Copyright 1993 by The Econometric Society.

'Actual' versus 'Virtual' Employment in Europe: Is Spain Different?

We study the evolution of sectoral employment and labor cost in eleven European countries in the last two decades. Our statistical approach consists in decomposing for country, industry and temporal effects. Virtual economies are constructed by filtering country effects. We find that sectoral effects account for more than 80% of the long-run differentials across countries and industries in employment growth, whereas countryspecific effects are more important in the analysis of labor cost dynamics. The initial distribution of labor across sectors plays a crucial role in explaining cross-country differences on employment. We pay special attention to Spain, the country that has experienced a higher persistent unemployment rate, and show that this can be the effect of a severe problem of sectoral reallocation, originating from the very high weight of the agricultural employment in 1975. Our study of the virtual economies also provides new evidence about the relative performance of some industries and/or countries, e.g., the poor performance of Belgium, the relatively good performance of Italy, in particular its textile sector, etc.

Employment and distributional effects of restricting working time

We study the emplyment and distributional effects of regulating (reducing) working time in a general equilibrium model with search-matching frictions. Job creation entails some fixed costs, but existing jobs are subject to diminishing returns. We characterize the equilibrium in the de-regulated economy where large firms and individual workers freely negotiate wages and hours. Then, we consider the effects of a legislation restricting the maximum working time, while we let wages respond endogenously. In general, this regulation benefits workers, both unemployed and employed (even if wages decrease), but reduces profits and and output. Employment effects are sensitive to the representation of preferences. In our benchmark, small reductions in working time, starting from the laissez-faire equilibrium solution, always increase employment, while larger reductions reduce employment. However, the employment gains from reducing working time are relatively small

Expectations and learning under alternative monetary regimes: an experimental approach*

SummaryWe design and analyze experimental versions of monetary overlapping generations economies under alternative policy regimes. Economies with a constant level of real deficit financed through seignorage, economies in which the level of deficit is adapted in order to follow a monetary policy with a target rate of inflation, and economies with preannounced changes in deficit levels are reported here. We also examine the behavior of an economy with no stationary competitive equilibrium. Our time series are compared to rational expectations equilibrium paths and to adaptive learning dynamics.

Nominal debt as a burden on monetary policy

We study a dynamic equilibrium model where the same optimal monetary policy is implemented with and without full commitment if government debt is indexed. In contrast, with nominal debt, the full commitment policy is time inconsistent, since the government is tempted to inflate away its nominal liabilities. We characterize the optimal sequential policy. It has the feature that government debt is progressively depleted, and so, eventually, the time inconsistency problem vanishes. We compare this equilibrium to a myopic solution and to the Ramsey solution.

Stochastic turnpike property and stationary equilibrium

Abstract I study the stability properties of a stochastic equilibrium growth model with a finite number of infinitely lived consumers. The exogenous stochastic environment is represented by a stationary stochastic process that influences preferences, technology, and primary resources. Consumers maximize the expected sum of discounted utilities. Production is intertemporal and primary resources are assumed to be necessary for the production of capital goods. By adapting standard assumptions in general equilibrium theory and turnpike theory, I show that if consumers have homogeneous discount factors close enough to one, the allocation of an interior equilibrium converges to the allocation of a stationary equilibrium with transfer payments. This result is used to prove the existence of a stationary equilibrium.