Macro-Simulation

Macro simulation refers to a simulation showing the effects of interventions at the macro level. In the1960s and early 1970s macro simulation was introduced to make economic analysis. Macro-simulations are quantitative models often based on control and feedback loops. They often are based on a large number of assumptions and remain at the macro level, although nowadays macro-level predictions are made by modelling at the micro level (see macro-economic models). These assumption are often critised as they proved to be wrong and backed by limited empirical evidence (e.g. Nelson & Winter, 1974). This resulted in skeptisims and a shiftt towards microsimulaton and agent-based models. In policy-making the interaction between micro and macro level has been put central. By modelling and understanding the micro-level, non-linear behavior at the macro level can be observed (Gilber & Troitzsch, 2005).

Related terms: Macroeconomic Models

References:

Gilbert, N. & K. Troitzsch (2005). Simulation and social science. Simulation for Social Scientists (2 ed.). Open University Press.

Nelson, R.R. and Winter, S.G. (1974). Neoclassical vs. Evolutionary Theories of Economic Growth: Critique and Prospectus. The Economic Journal,Vol. 84, No. 336, pp. 886-905