Discussion Paper

No. 2017-112 | December 13, 2017
Time-varying fiscal multipliers in an agent-based model with credit rationing

Abstract

The authors build a simple 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 affected by the state of credit markets. They 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, the authors show that different conditions in the credit market significantly affect the size and the evolution of fiscal multipliers.

JEL Classification:

E63, E21, C63

Assessment

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Links

Cite As

Mauro Napoletano, Andrea Roventini, and Jean-Luc Gaffard (2017). Time-varying fiscal multipliers in an agent-based model with credit rationing. Economics Discussion Papers, No 2017-112, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2017-112


Comments and Questions


Anonymous - Referee Report 1
January 08, 2018 - 11:58

see attached file


Mattia Guerini - Referee Report
January 24, 2018 - 10:47

see attached file