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Fiscal and monetary policies in complex evolving economies

Giovanni Dosi (), Giorgio Fagiolo (), Mauro Napoletano (), Andrea Roventini and Tania Treibich ()

Journal of Economic Dynamics and Control, 2015, vol. 52, issue C, 166-189

Abstract: What is the most appropriate combination of fiscal and monetary policies in economies subject to banking crises and deep recessions? We study this issue using an agent-based model that is able to reproduce a wide array of macro- and micro-empirical regularities. Simulation results suggest that policy mixes associating unconstrained, counter-cyclical fiscal policy and monetary policy targeting employment is required to stabilise the economy. We also show that “discipline-guided” fiscal rules can be self-defeating, as they depress the economy without improving public finances. Finally, we find that the effects of monetary and fiscal policies become sharper as the level of income inequality increases.

Keywords: Agent-based model; Fiscal policy; Monetary policy; Income inequality; Austerity policies (search for similar items in EconPapers)
JEL-codes: C63 E32 E6 E52 G21 O4 (search for similar items in EconPapers)
Date: 2015
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Related works:
Working Paper: Fiscal and monetary policies in complex evolving economies (2015)
Working Paper: Fiscal and monetary policies in complex evolving economies (2014) Downloads
Working Paper: Fiscal and Monetary Policies in Complex Evolving Economies (2014) Downloads
Working Paper: Fiscal and monetary policies in complex evolving economies (2014) Downloads
Working Paper: Fiscal and Monetary Policies in Complex Evolving Economies (2014) Downloads
Working Paper: Fiscal and monetary policies in complex evolving economies (2014) Downloads
Working Paper: Fiscal and Monetary Policies in Complex Evolving Economies (2014) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:52:y:2015:i:c:p:166-189

DOI: 10.1016/j.jedc.2014.11.014

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