Fiscal Policies and Credit Regimes: A TVAR Approach

Ferraresi, Tommaso; Roventini, Andrea; Fagiolo, Giorgio

doi:10.2139/ssrn.2211105

Cited by 12 publications

(7 citation statements)

References 141 publications

(186 reference statements)

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“…This is in line with empirical observations suggesting that the effects of fiscal policies change according to the state of the economy (see e.g. Auerbach and Gorodnichenko, 2012) or of credit markets (Ferraresi et al, 2013). Absolute value of simulation t-statistic of H 0 : "no difference between baseline and the experiment" in parentheses; (**) significant at 1% level, (*) significant at 5% level.…”

Section: Fiscal and Monetary Policy Interactionssupporting

confidence: 87%

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Fiscal and monetary policies in complex evolving economies

Dosi

Fagiolo

Napoletano

et al. 2015

Journal of Economic Dynamics and Control

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215

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In this paper we explore the effects of alternative combinations of fiscal and monetary policies under different income distribution regimes. In particular, we aim at evaluating fiscal rules in economies subject to banking crises and deep recessions. We do so using an agent-based model populated by heterogeneous capital-and consumption-good firms, heterogeneous banks, workers/consumers, a Central Bank and a Government. We show that the model is able to reproduce a wide array of macro and micro empirical regularities, including stylised facts concerning financial dynamics and banking crises. Simulation results suggest that the most appropriate policy mix to stabilise the economy requires unconstrained counter-cyclical fiscal policies, where automatic stabilisers are free to dampen business cycles fluctuations, and a monetary policy targeting also employment. Instead, "discipline-guided" fiscal rules such as the Stability and Growth Pact or the Fiscal Compact in the Eurozone always depress the economy, without improving public finances, even when escape clauses in case of recessions are considered. Consequently, austerity policies appear to be in general self-defeating. Furthermore, we show that the negative effects of austere fiscal rules are magnified by conservative monetary policies focused on inflation stabilisation only. Finally, the effects of monetary and fiscal policies become sharper as the level of income inequality increases.

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Section: Fiscal and Monetary Policy Interactionssupporting

confidence: 87%

“…the Abenomics experiment, see Patrick, 2013). Finally, the impact of fiscal policies (for any type of monetary rule) could be better assessed by computing the size of the fiscal multipliers according to the state of the economy along the lines of Auerbach and Gorodnichenko (2012) and Ferraresi et al (2013).…”

Section: Discussionmentioning

confidence: 99%

Fiscal and monetary policies in complex evolving economies

Dosi

Fagiolo

Napoletano

et al. 2015

Journal of Economic Dynamics and Control

Self Cite

215

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“…Auerbach and Gorodnichenko, 2012a) and financial markets (Mittnik and Semmler, 2013;Ferraresi et al, 2014). Technology shocks can be highly dependent on the state of the economy as their effects can be deeply intertwined with (i) the monetary policy regimes (see e.g.…”

Section: Introductionmentioning

confidence: 99%

“…Regimes shifts are usually sparked by threshold variables related to the state of the real economy (recession or expansion, see e.g., Auerbach and Gorodnichenko, 2012b,a;Bachmann and Sims, 2012), or to financial markets (see e.g. Mittnik and Semmler, 2013;Ferraresi et al, 2014). …”

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confidence: 99%

Macroeconomic Regimes, Technological Shocks and Employment Dynamics

Ferraresi¹,

Roventini

Semmler

2016

SSRN Journal

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In this work we investigate the interrelations among technology, output and employment in the different states of the U.S. economy (recessions vs. expansions). More precisely, we estimate different threshold vector autoregression (TVAR) models with TFP, hours, and GDP, employing the latter as threshold variable, and we assess the ensuing generalized impulse responses of GDP and hours as to TFP shocks. We find that positive productivity shocks, while spurring GDP growth, display a negative effect on hours worked at least on impact, independently of the state of the economy. In the 1957-2011 period, the effects of productivity shocks on employment are abundantly negative in downturns, but they are not significantly different from zero in good times. However, the impact of TFP shocks in different business cycle regimes depends on the chosen sample: after the mid eighties , productivity shocks increase hours during recessions. Finally, we express and test some conjectures that might have caused the changes in the responses in different time periods.JEL Codes: E32, O33, C32, E63, E20

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“…Auerbach and Gorodnichenko, 2012) and financial markets (Mittnik and Semmler, 2013;Ferraresi et al, 2014). In DSGE models, the effects of monetary and fiscal policies are time invariant, even if the economy is trapped in a depression.…”

Section: Empirical Issuesmentioning

confidence: 99%

Macroeconomic Policy in DSGE and Agent-Based Models Redux: New Developments and Challenges Ahead

Fagiolo

Roventini

2016

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe Great Recession seems to be a natural experiment for economic analysis, in that it has shown the inadequacy of the predominant theoretical framework -the New Neoclassical Synthesis (NNS) -grounded on the DSGE model. In this paper, we present a critical discussion of the theoretical, empirical and political-economy pitfalls of the DSGE-based approach to policy analysis. We suggest that a more fruitful research avenue should escape the strong theoretical requirements of NNS models (e.g., equilibrium, rationality, representative agent, etc.) and consider the economy as a complex evolving system, i.e. as an ecology populated by heterogenous agents, whose far-from-equilibrium interactions continuously change the structure of the system. This is indeed the methodological core of agent-based computational economics (ACE), which is presented in this paper. We also discuss how ACE has been applied to policy analysis issues, and we provide a survey of macroeconomic policy applications (fiscal and monetary policy, bank regulation, labor market structural reforms and climate change interventions). Finally, we conclude by discussing the methodological status of ACE, as well as the problems it raises.

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Fiscal Policies and Credit Regimes: A TVAR Approach

Cited by 12 publications

References 141 publications

Fiscal and monetary policies in complex evolving economies

Fiscal and monetary policies in complex evolving economies

Macroeconomic Regimes, Technological Shocks and Employment Dynamics

Macroeconomic Policy in DSGE and Agent-Based Models Redux: New Developments and Challenges Ahead

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