An Agent-Based Model of the Tunisian Economy: Heterogeneity, Informal Sector, and Monetary Policy Transmission

From the paper

Abstract

Abstract This paper introduces an Agent-Based Model (ABM) developed to analyze the macroeconomic dynamics of the Tunisian economy. Unlike traditional aggregate models, this bottom-up approach simulates the decentralized decisions and interactions of heterogeneous households and firms, allowing for the emergence of aggregate macroeconomic variables such as GDP, inflation, and interest rates. The variables simulated by our ABM strongly reflect many characteristics of the observed macroeconomic variables of Tunisia over the last decades, including moderate GDP growth with cyclical fluctuations, persistent inflation, and interest rate dynamics. A key feature of the model is the explicit incorporation of firm heterogeneity, distinguishing between formal and informal sectors, and the implicit representation of financial and monetary institutions through credit access mechanisms and a Taylor-type monetary policy rule. We detail the behavioral rules of individual agents, the channels of interaction, and the emergent macroeconomic dynamics. The model is designed to offer a richer perspective on the transmission mechanisms of various shocks, particularly within an economy characterized by significant informal activity and financial frictions, and is calibrated to reflect the specific context of Tunisia.