Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098336 | Journal of Economic Dynamics and Control | 2015 | 42 Pages |
Abstract
What is the most appropriate combination of fiscal and monetary policies in economies subject to banking crises and deep recessions? We study this issue using an agent-based model that is able to reproduce a wide array of macro- and micro-empirical regularities. Simulation results suggest that policy mixes associating unconstrained, counter-cyclical fiscal policy and monetary policy targeting employment is required to stabilise the economy. We also show that “discipline-guided” fiscal rules can be self-defeating, as they depress the economy without improving public finances. Finally, we find that the effects of monetary and fiscal policies become sharper as the level of income inequality increases.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Giovanni Dosi, Giorgio Fagiolo, Mauro Napoletano, Andrea Roventini, Tania Treibich,