Stabilizing fiscal policies with capital market imperfections

Nicolas Dromel

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

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: Endogenous business cycles; capital market imperfections; access to productive investment; fiscal policy; macroeconomic stabilization (search for similar items in EconPapers)
JEL-codes: E22 E32 E44 E62 H20 H30 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2009-05
New Economics Papers: this item is included in nep-fdg and nep-mac
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ftp://mse.univ-paris1.fr/pub/mse/CES2009/09030.pdf (application/pdf)

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:mse:cesdoc:09030

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