Does fiscal policy matter? Tax, transfer, and spend in a macro ABM with capital and credit
Authored by Jakob Grazzini, T Assenza, P Colzani, Gatti D Delli
Date Published: 2018
DOI: 10.1093/icc/dty017
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Abstract
We investigate, compare, and contrast the emerging properties of a
macroeconomic agent-based model along the lines of Assenza et al.,
(2015, Journal of Economic Dynamics and Control, 50, 5-28) when the
government experiments with different policy configurations: (i) tax and
transfer; (ii) tax, transfer, and spend; and (iii) the implementation of
a fiscal rule, such as a stylized Stability and Growth Pact. In some of
the scenarios considered, a remarkable property can be detected, which
we label the balanced budget emerging property: The scale of activity in
the aggregate (GDP, employment, and unemployment rate) is such that a
balanced budget emerges spontaneously. The strong implication of this
property is that the fiscal authority is able to target GDP and the
unemployment rate, a result reminiscent of the Blinder-Solow framework.
It is worth noting, however, that there are many departures from the
rule, which we have detected by carrying out the sensitivity analysis.
Tags
Agent-based model
Dynamics