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Time-Varying Fiscal Multipliers in an Agent-Based Model with Credit Rationing

Author

Listed:
  • Mauro Napoletano

    (OFCE and SKEMA Business School, Sophia-Antipolis (France)
    Scuola Superiore Sant'Anna, Pisa (Italy))

  • Andrea Roventini

    (University of Verona (Italy)
    Scuola Superiore Sant'Anna, Pisa (Italy)
    OFCE and SKEMA Business School, Sophia-Antipolis (France))

  • Jean-Luc Gaffard

    (OFCE Sciences Po
    University of Nice Sophia Antipolis, France
    Skema Business School)

Abstract

We build an agent-based model populated by households with heterogenous and time-varying financial conditions in order to study how fiscal multipliers can change over the business cycle and are a ected by the state of credit markets. We find that deficit-spending fiscal policy dampens the effect of bankruptcy shocks and lowers their persistence. Moreover, the size and dynamics of government spending multipliers are related to the degree and persistence of credit rationing in the economy. On the contrary, in presence of balanced-budget rules, output permanently falls below pre-shock levels and the ensuing multipliers fall below one and are much lower than the ones emerging from the deficit-spending policy. Finally, we show that different conditions in the credit market significantly affect the size and the evolution of fiscal multipliers.

Suggested Citation

  • Mauro Napoletano & Andrea Roventini & Jean-Luc Gaffard, 2015. "Time-Varying Fiscal Multipliers in an Agent-Based Model with Credit Rationing," GREDEG Working Papers 2015-30, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
  • Handle: RePEc:gre:wpaper:2015-30
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    References listed on IDEAS

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    Cited by:

    1. Popoyan, Lilit & Napoletano, Mauro & Roventini, Andrea, 2017. "Taming macroeconomic instability: Monetary and macro-prudential policy interactions in an agent-based model," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 117-140.
    2. repec:kap:compec:v:50:y:2017:i:4:d:10.1007_s10614-017-9671-y is not listed on IDEAS

    More about this item

    Keywords

    Fiscal multipliers; agent-based models; credit-rationing; balance-sheet recession; bankruptcy shocks;

    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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