The durations of recession and prosperity: does their distribution follow a power or an exponential law?

Ausloos, Marcel; Miśkiewicz, Janusz; Sanglier, Michèle

doi:10.1016/j.physa.2004.03.005

Cited by 49 publications

(25 citation statements)

References 15 publications

(45 reference statements)

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“…the second column of Table 1). Moreover, in line with Ausloos et al (2004), the large majority of economic crises are short-lived, lasting only one period, but few downturns have a long duration. As a consequence, the model-generated distribution of recession durations is exponential well in line with the empirical evidence (cf.…”

Section: Accounting For Mild and Deep Recessionsmentioning

confidence: 85%

The Short- and Long-Run Damages of Fiscal Austerity: Keynes beyond Schumpeter

Dosi

Napoletano

Roventini

et al. 2016

Contemporary Issues in Macroeconomics

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In this work we analyze the short-and long-run effects of fiscal austerity policies, employing an agent-based model populated by heterogeneous, boundedly-rational firms and banks. The model, in line with the family of "Keynes+Schumpeter" formalism, is able to account for a wide array of macro and micro empirical regularities. In particular, it endogenously generates self-sustained growth patterns together with persistent economic fluctuations punctuated by deep downturns. On the policy side, we find that austerity policies considerably harm the economy, by increasing output volatility, unemployment, and the incidence of crises. In addition, they depress innovation and the diffusion of new technologies, thus reducing long-run productivity and GDP growth. Finally, we show that "discipline-guided" fiscal rules are self-defeating, as they do not stabilize public finances, but, on the contrary, they disrupt them.

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Section: Accounting For Mild and Deep Recessionsmentioning

confidence: 85%

The Short- and Long-Run Damages of Fiscal Austerity: Keynes beyond Schumpeter

Dosi

Napoletano

Roventini

et al. 2016

Contemporary Issues in Macroeconomics

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“…In line with Ausloos et al (2004), the large majority of economic crises are short-lived, lasting only one period. Moreover, the distribution of recession durations is exponential (Wright, 2005) Finally, the model is also able to replicate a large array of microeconomic empirical regularities (see e.g.…”

Section: Empirical Validationmentioning

confidence: 87%

Fiscal and monetary policies in complex evolving economies

Dosi

Fagiolo

Napoletano

et al. 2015

Journal of Economic Dynamics and Control

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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“…Recessions tend not to last longer than 6 years, the majority of recessions last 1 year, and for the US the longest recession has been only 4 years (Ormerod, 2002). Ausloos et al (2004) subsequently analyzed a more comprehensive set of GDP data and concluded that overall the durations more closely follow a power-law, not an exponential law. In the light of this more extensive data set we must conclude that the CSA model only approximately replicates the empirical distribution.…”

Section: Duration Of Recessionsmentioning

confidence: 99%

Implicit Microfoundations for Macroeconomics

Wright

2009

Economics

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A large market economy has a huge number of degrees of freedom with weak microlevel coordination. The 'implicit microfoundations' approach considers this property of micro-level interactions to more strongly determine macro-level outcomes compared to the precise details of individual choice behavior; that is, the 'particle' nature of individuals dominates their 'mechanical' nature. So rather than taking an 'explicit microfoundations' approach, in which individuals are represented as 'white-box' sources of fully-specified optimizing behavior ('rational agents'), we instead represent individuals as 'black box' sources of unpredictable noise subject to objective constraints ('zero-intelligence agents'). To illustrate the potential of the approach we examine a parsimonious, agent-based macroeconomic model with implicit microfoundations. It generates many of the reported empirical distributions of capitalist economies, including the distribution of income, firm sizes, firm growth, GDP and recessions. Special issue Reconstructing MacroeconomicsJEL: A12, B41, C63, D50, E11, P16

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The durations of recession and prosperity: does their distribution follow a power or an exponential law?

Cited by 49 publications

References 15 publications

The Short- and Long-Run Damages of Fiscal Austerity: Keynes beyond Schumpeter

The Short- and Long-Run Damages of Fiscal Austerity: Keynes beyond Schumpeter

Fiscal and monetary policies in complex evolving economies

Implicit Microfoundations for Macroeconomics

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