Stabilizing Fiscal Policies with Capital Market Imperfections

Nicolas Dromel

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: We analyze how investment subsidies can affect aggregate volatility and growth in economies subject to capital market imperfections. Within a model featuring both frictions on the credit market and unequal access to investment opportunities among individuals, we provide specific fiscal parameters able to reduce the probability of recessions, fuel the economy long-run growth rate and place it on a permanent-boom dynamic path. We analyze how conditions on the stabilizing fiscal parameters are modified when frictions in the economy evolve. Eventually, we show how this tax and transfer system can moderate persistence in the economy's response to temporary and permanent productivity shocks.

Keywords: macroeconomic stabilization; Endogenous business cycles; capital market imperfections; access to productive investment; fiscal policy; macroeconomic stabilization.; Cycles d'affaires endogènes; imperfections sur le marché du capital; accès à l'investissement productif; politique fiscale; stabilisation macroéconomique. (search for similar items in EconPapers)
Date: 2009-05
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00389690v1
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Published in 2009

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Related works:
Working Paper: Stabilizing Fiscal Policies with Capital Market Imperfections (2009)
Working Paper: Stabilizing fiscal policies with capital market imperfections (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:halshs-00389690

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