The effects of fiscal targets in a monetary union: a Multi-Country Agent-Based Stock Flow Consistent model

Caiani, Alessandro; Catullo, Ermanno; Gallegati, Mauro

doi:10.1093/icc/dty016

Cited by 20 publications

(27 citation statements)

References 38 publications

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“…32 See for instance early evolutionary growth models (Verspagen 1992;Dosi et al 1994;Silverberg and Verspagen 1995). For some agent-based evolutionary models see Dosi et al, Dawid et al 2014, Dosi et al 2019, 2020Caiani et al 2016;Lorentz et al 2016;Ciarli et al 2019;Caiani et al 2018;Dawid et al 2018. Figure 7 reports the estimated structural breaks for each time series.…”

Section: Three Breaksmentioning

confidence: 99%

Characterizing growth instability: new evidence on unit roots and structural breaks in countries’ long run trajectories

Russo

Foster‐McGregor

2021

J Evol Econ

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In this paper we investigate whether long run time series of income per capita are better described by a trend-stationary model with few structural changes or by unit root processes in which permanent stochastic shocks are responsible for the observed growth discontinuities. For a group of advanced and developing countries in the Maddison database, we employ a unit root test that allows for an unspecified number of breaks under the alternative hypothesis (up to some ex ante determined maximum). Monte Carlo simulations studying the finite sample properties of the test are reported and discussed. When compared with previous findings in the literature, our results show less evidence against the unit root hypothesis. We find even fewer rejections when relaxing the assumption of Gaussian shocks. Our results are broadly consistent with the implications of evolutionary macro models which posit frequent growth shifts and fat-tailed distribution of aggregate shocks.

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Section: Three Breaksmentioning

confidence: 99%

Characterizing growth instability: new evidence on unit roots and structural breaks in countries’ long run trajectories

Russo

Foster‐McGregor

2021

J Evol Econ

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“…[ 45 , 47 , 53 , 54 ]). One main limitation of such studies is that they concentrate on the financial fragility emerging out of the banking sector via inequality [ 52 , 55 ] monetary union imbalances [ 56 , 57 ], banking regulations (or the lack thereof), and banking behaviours [ 45 , 47 , 54 ]. None of these contributions explicitly consider financial market trading equity.…”

Section: Introductionmentioning

confidence: 99%

Managerial overconfidence in capital structure decisions and its link to aggregate demand: An agent-based model perspective

et al. 2021

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Objective This study aims to connect two strands of the psychology and economics literature, i.e., behavioural finance and agent-based macroeconomics, to assess the impact of managerial overconfidence at the micro and macro levels of the economy as a whole. Method We build a macroeconomic stock-flow consistent agent-based model that is calibrated for the specific case of Poland to explore whether the overconfidence of top corporate managers in the context of their initial capital structure decisions is detrimental for the firms being managed in this way, the financial market dynamics, and the selected macroeconomic indicators. We model heterogeneous firms with different capital structure decision criteria depending on their degree of managerial overconfidence. Our model also includes a complete macroeconomic closure with aggregated households, capital producers, banking, and a public sector. Results We find that firms with overconfident managers outperform in terms of investment and size but are also more fragile, thereby making them more likely to default. Finally, we run policy shocks and show that while investors’ flight to liquidity creates financial turmoil and increases the probability of default. Conclusions This paper contributes to the knowledge base by linking behavioural corporate finance and agent-based macroeconomics. In general, the excess overconfidence on the micro level, either an increase in the proportion of overconfident firms or a higher degree of overconfidence among managers, has a strong destabilizing impact on the economy as a whole on the macro level.

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“…2 The K+S family now encompasses several extensions, accounting for: the financial sector (Dosi et al, 2013(Dosi et al, , 2015; coupled climate and economic dynamics (Lamperti et al, 2018(Lamperti et al, , 2019; labour market and different institutional regimes (Dosi et al, 2017b(Dosi et al, , 2018(Dosi et al, , 2019a. There is also a growing body of open-economy ABMs focused on international or regional convergence/divergence such as Caiani et al (2018); Dawid et al (2014; Petrović et al (2020); Wolf et al (2013). Early evolutionary multi-country models are found in Dosi et al (1994b) and Silverberg and Verspagen (1995).…”

Section: Introductionmentioning

confidence: 99%

Public policies and the art of catching up: matching the historical evidence with a multicountry agent-based model

Dosi

Roventini

Russo

2020

Industrial and Corporate Change

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In this paper, we study the effects of industrial policies on international convergence using a multi-country agent-based model which builds upon Dosi et al. (2019b). The model features a group of microfounded economie s, with evolving industries, populated by heterogeneous firms that compete in international markets. In each country, technological change is driven by firms' activities of search and innovation, while aggregate demand formation and distribution follows Ke ynesian dynamics. Interactions among countries take place via trade flows and international technological imitation. We employ the model to assess the different strategies that laggard countries can adopt to catch up with leaders: market-friendly policies; industrial policies targeting the development of firms' capabilities and R&D investments, as well as trade restrictions for infant industry protection; protectionist policies focusing on tariffs only. We find that markets cannot do the magic: in absence of government interventions, laggards will continue to fall behind. On the contrary, industrial policies can successfully drive international convergence among leaders and laggards, while protectionism alone is not necessary to support catching up and countries get stuck in a sort of middle-income trap. Finally, in a global trade war, where developed economies impose retaliatory tariffs, both laggards and leaders are worse off and world productivity growth slows down.

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The effects of fiscal targets in a monetary union: a Multi-Country Agent-Based Stock Flow Consistent model

Cited by 20 publications

References 38 publications

Characterizing growth instability: new evidence on unit roots and structural breaks in countries’ long run trajectories

Characterizing growth instability: new evidence on unit roots and structural breaks in countries’ long run trajectories

Managerial overconfidence in capital structure decisions and its link to aggregate demand: An agent-based model perspective

Public policies and the art of catching up: matching the historical evidence with a multicountry agent-based model

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