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Forecasting investment and consumption behavior of economic agents through dynamic computable general equilibrium model

Author

Listed:
  • Irfan Ahmed

    (Preston University)

  • Claudio Socci

    (University of Macerata)

  • Francesca Severini

    (University of Macerata)

  • Qaiser Rafique Yasser

    (Preston University)

  • Rosita Pretaroli

    (University of Macerata)

Abstract

Much research has been devoted to examination of the financial easing policy of the European Central Bank (ECB). However, this study is one of the first to use a dynamic micro-founded model to investigate empirically the impact of the ECB’s Quantitative Easing (QE) policy on consumption and investment by economic agents in Italy (households, government, firms, and the rest of the world). For this purpose, we constructed a Financial Social Accounting Matrix (FSAM) for the Italian economy for the year 2009 to calibrate a dynamic computable general equilibrium model (DCGE). This model allowed us to evaluate the direct and indirect impact of money flow on the behavior of consumption and investment. The findings of the study confirmed the positive impact of the ECB’s monetary policy on the level of investment and consumption.

Suggested Citation

  • Irfan Ahmed & Claudio Socci & Francesca Severini & Qaiser Rafique Yasser & Rosita Pretaroli, 2018. "Forecasting investment and consumption behavior of economic agents through dynamic computable general equilibrium model," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 4(1), pages 1-21, December.
    • Handle: RePEc:spr:fininn:v:4:y:2018:i:1:d:10.1186_s40854-018-0091-3
    DOI: 10.1186/s40854-018-0091-3
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    Cited by:

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    5. Carlos Madeira, 2023. "Adverse selection, loan access and default behavior in the Chilean consumer debt market," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-29, December.
    6. Zhang, Huanhuan & Kou, Gang & Peng, Yi, 2019. "Soft consensus cost models for group decision making and economic interpretations," European Journal of Operational Research, Elsevier, vol. 277(3), pages 964-980.
    7. Irfan Ahmed & Claudio Socci & Francesca Severini & Rosita Pretaroli & Hassan Kasady Al Mahdi, 2020. "Unconventional monetary policy and real estate sector: a financial dynamic computable general equilibrium model for Italy," Economic Systems Research, Taylor & Francis Journals, vol. 32(2), pages 221-238, April.

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    More about this item

    Keywords

    European Central Bank; Quantitative easing; Monetary policy; Investment behavior; Social accounting matrix; Dynamic CGE analysis;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis

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