Does fiscal policy matter? Tax, transfer, and spend in a macro ABM with capital and credit

Tiziana Assenza, P Colzani, Domenico Delli Gatti and Jakob Grazzini

Industrial and Corporate Change, 2018, vol. 27, issue 6, 1069-1090

Abstract: We investigate, compare, and contrast the emerging properties of a macroeconomic agent-based model along the lines of Assenza et al., (2015, Journal of Economic Dynamics and Control, 50, 5–28) when the government experiments with different policy configurations: (i) tax and transfer; (ii) tax, transfer, and spend; and (iii) the implementation of a fiscal rule, such as a stylized Stability and Growth Pact. In some of the scenarios considered, a remarkable property can be detected, which we label the balanced budget emerging property: The scale of activity in the aggregate (GDP, employment, and unemployment rate) is such that a balanced budget emerges spontaneously. The strong implication of this property is that the fiscal authority is able to target GDP and the unemployment rate, a result reminiscent of the Blinder–Solow framework. It is worth noting, however, that there are many departures from the rule, which we have detected by carrying out the sensitivity analysis.

JEL-codes: E32 E44 E62 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (10)

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