The Bank of England has published a staff working paper that surveys how central banks and related policy institutions have increasingly used agent-based models (ABMs) over the past decade. The paper concludes that ABMs have become a useful complement to existing analytical tools, particularly as central bank mandates expanded after the 2007–09 global financial crisis, and argues that deeper integration of ABMs can support policy responses to challenges including financial innovation and climate change. The review classifies ABM-related outputs into three groups: applied research linked to central bank mandates, technical and methodological work to advance ABMs, and examples where ABMs have been incorporated into policy analysis. It highlights ABM applications across financial stability, price stability and monetary policy analysis, payment systems and central bank digital currencies, and climate-related risk analysis, while noting that advances in computational power, data availability, and interdisciplinary methods have enabled larger and more policy-oriented models. The paper is presented as research in progress intended to elicit external comment and debate, and is expected to be contributed as a chapter to a forthcoming Santa Fe Institute edited volume.
Bank of England 2025-02-01
Bank of England publishes working paper mapping how central banks use agent-based models in research and policy work
The Bank of England's staff paper examines the growing use of agent-based models (ABMs) by central banks over the past decade. It highlights ABMs as valuable complements to traditional tools, aiding policy responses to financial innovation and climate change. The paper categorizes ABM outputs into applied research, technical advancements, and policy analysis, emphasizing their role in financial stability, monetary policy, and climate risk analysis.