Fiscal and Monetary Policies in Complex Evolving Economies
Working Paper #281
We build an agent-based model that can be employed as a laboratory to explore the e ects of
alternative combinations of scal and monetary policies under di erent income distribution
regimes. In particular, this setting allows us to evaluate scal rules in a dynamic environment
subject to banking crises and deep recessions. Portraying an economy with heterogeneous
capital- and consumption-good rms, heterogeneous banks, workers/consumers, a central
bank and a Government, the model is able to reproduce a wide array of macro, micro
empirical regularities, as well stylized facts concerning banking crises. Simulation results
show that there are strong interactions between di erent types of scal and monetary policies.
The appropriate policy mix to stabilize the economy requires an unconstrained scal policy,
where automatic stabilizers are free to dampen business cycles
uctuations, and a monetary
policy targeting both price and output stability. Instead, scal rules such as the Stability
and Growth Pact or the Fiscal Compact always depress the economy without improving
public nances, even when escape clauses in case of recessions are considered. In that,
austerity policies are self-defeating. Furthermore, the negative e ects of scal rules are
magni ed by conservative monetary policies focused on in
ation stabilization only. Finally,
our conclusions about the e ects of di erent monetary and scal policies become sharper as
the level of income inequality increases.
About the Authors
Professor of Economics
Sant'Anna School of Advanced Studies of Pisa
Giovanni Dosi is Professor of Economics at the Scuola Superiore Sant'Anna in Pisa and Visiting Professor at the University of Manchester. His major research areas include economics of innovation and technological change, industrial organisation and industrial dynamics, theory of the firm and corporate governance, economic growth and development. Professor Dosi is Co-Director of the task forces on Industrial Policy and Intellectual Property Rights at the Initiative for Policy Dialogue, Columbia University, New York; Continental Europen Editor of Industrial and Corporate Change, Research consultant for Italian and international public and private institutions, and Honorary Research Professor at the University of Sussex.
Associate Professor of Economics
Laboratory of Economics and Management
Sant’Anna School of Advanced Studies
I am Associate Professor of Economics at the Laboratory of Economics and Management, Sant’Anna School of Advanced Studies. My research interests include agent-based computational economics; empirics and theory of economic networks; and the statistical properties of microeconomic and macroeconomic dynamics.
My papers have been published in the following journals:
Science, Journal of Economic Geography, Journal of Applied Econometrics, Journal of Economics Dynamics and Control, Computational Economics, Physical Review E, Journal of Economic Behavior and Organization, Industrial and Corporate Change, Advances in Complex Systems, Journal of Evolutionary Economics, European Physical Journal B, Journal of Economic Interaction and Coordination, Empirical Economics.
Department for Research on Innovation and Competition
Observatoire Français des Conjonctures Economiques
University of Verona
Andrea Roventini is assistant professor at the University of Verona (Italy). He is an affiliated research fellow of the Laboratory of Economics and Management at the Sant'Anna School of Advanced Studies in Pisa (Italy) and of the OFCE (French Economic Observatory, Sciences Po) in Paris and Sophia-Antipolis (France).
He holds a bachelor's degree in economics from the University of Modena and Reggio Emilia (Italy) and a Ph.D. in economics from the Sant'Anna School of Advanced Studies.
His major research areas include agent-based computational economics, business cycles, applied macroeconometrics, and the statistical properties of micro- and macro-economic dynamics. His papers have been published in Journal of Applied Econometrics, Journal of Economics Dynamics and Control, Journal of Evolutionary Economics, Computational economics, European Physical Journal B, and Cybernetics and Systems.
Post Doctoral Researcher
University of Maastricht
I just started as a Post-Doctoral researcher at the University of Maastricht (AE2 department), after receiving my PhD in Economics from the University of Nice (GREDEG lab) and the Scuola Superiore Sant'Anna of Pisa (LEM), under the supervision of Professors Jean-Luc Gaffard and Giovanni Dosi.
My general research interest relates to the transmission mechanisms between the financial sector and the real economy as well as the fiscal and economic costs of banking crises. I have also worked on micro issues such as the link between industrial dynamics and trade, or firms' access to banking finance and their performance.