2025/10 | LEM Working Paper Series | ||||||||||||||||
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Are fiscal multipliers state dependent? Insights from an agent-based model |
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Marco Amendola and Marcelo C. Pereira |
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Keywords | |||||||||||||||||
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Fiscal policy; State-dependent fiscal multipliers; Agent-based models; Non-linear dynamics
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JEL Classifications | |||||||||||||||||
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C63; E62; H30
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Abstract | |||||||||||||||||
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The paper examines the macroeconomic effects of
fiscal policy under varying economic
conditions. The analysis is conducted using a
closed-economy agent-based model, where
macroeconomic outcomes of fiscal intervention
emerge from the bottom up as the result of
interactions between heterogeneous agents in
different markets, with feedback loops between
demand, supply, and the financial sector. The
model simulation results indicate that
expansionary fiscal policies generate significant
positive effects on aggregate output, with a
public consumption multiplier of 1.6 on average,
and an income tax multiplier of approximately
1.0. Notably, the effectiveness of a public direct
consumption stimulus exhibits significant
non-linearities, with multipliers reaching up to
3.5 during periods of economic slack and 2.5
during times of high financial fragility. In
contrast, income tax rate multiplier appears
largely acyclical. Overall, this analysis
contributes to the growing and unsettled debate on
the state-dependent effects of fiscal policy,
providing model-based insights into this crucial
topic.
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