Semiadaptative Expectations in Macroeconomic Multiagent Models. An Application to Corporate Financial Fragility Analysis

Abstract

This paper introduces a new type of expectations for agent-based modeling in macroeconomics. We convert adaptive expectations, which constitute the standard expectation mechanism in agent-based macroeconomic modeling, into semi-adaptive expectations. This new expectation mechanism takes into account the volatility in expectations in relation to the influence of feelings of optimism/pessimism on the cognition of agents. Semi-adaptive expectations are then integrated into a macroeconomic agent-based model to illustrate how they influence the financial distress of firms. Among the results, we found that firms could limit the extent of financial distress if they expect their proceeds with the highest level of volatility around an initial expectation used as a long-term quasi-reference.