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

Mauro Napoletano, Andrea Roventini and Jean-Luc Gaffard

No 2015-30, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France

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.

Keywords: Fiscal multipliers; agent-based models; credit-rationing; balance-sheet recession; bankruptcy shocks (search for similar items in EconPapers)
JEL-codes: C63 E21 E63 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2015-09
New Economics Papers: this item is included in nep-cmp, nep-hme and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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http://195.220.190.85/GREDEG-WP-2015-30.pdf First version, 2015 (application/pdf)

Related works:
Working Paper: Time-varying fiscal multipliers in an agent based model with credit-rationing (2017)
Working Paper: Time-varying fiscal multipliers in an agent based model with credit-rationing (2017)
Working Paper: Time-varying fiscal multipliers in an agent-based model with credit rationing (2017)
Working Paper: Time varying fiscal multipliers in an agent-based model with credit rationing (2015)
Working Paper: Time varying fiscal multipliers in an agent-based model with credit rationing (2015)
Working Paper: Time-Varying Fiscal Multipliers in an Agent-Based Model with Credit Rationing (2015)
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