Theoretical Modeling of Macroeconomic Stability under Austerity: The Roles of FDI, Consumption Volatility, and Wage Financing

Houssam Boughabi

MPRA Paper from University Library of Munich, Germany

Abstract: This study examines the persistence of investment in a closed economy under austerity conditions, focusing on the interaction between foreign direct investment (FDI), public expenditures, and payroll financing. We develop a dynamic model where investment volatility follows a FIGARCH process, capturing long-memory effects, while household consumption and investment interact through adaptive expectations. Policy implications suggest that strategic fiscal interventions can mitigate the adverse effects of economic contractions, supporting long-term investment flows and financial stability.

Keywords: Investment Volatility; Austerity Policies; Economic Dynamics; Fiscal Policy Analysis (search for similar items in EconPapers)
JEL-codes: C58 E62 G32 H63 H68 (search for similar items in EconPapers)
Date: 2025-05-22
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Journal of Business and Econometrics Studies 3.2(2025): pp. 1-6

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/126296/1/MPRA_paper_126296.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:126296

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().