Of fairies and governments: An ABM evaluation of the expansionary austerity hypothesis

Artikel

This paper draws on a debate between Robert Skidelsky and Paul Krugman on the expansionary austerity hypothesis as a motivation to build a demand-driven agent-based model. The model features contagion across firms to explore whether fiscal consolidations may become expansionary due to a positive effect on investors' expectations, which could be the result of a dominant public discourse on the need for austerity. Simulations suggest that while a wave of optimism affecting a small proportion of firms may lead to short-run positive output effects in the economy by raising investment demand, these effects are not sufficient to neutralize the negative macroeconomic impacts of cutting government spending. These findings are in keeping with the scantiness (or absence) of empirical evidence in favor of the expansionary fiscal contraction hypothesis.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: EconomiA ; ISSN: 1517-7580 ; Volume: 21 ; Year: 2020 ; Issue: 2 ; Pages: 233-254 ; Amsterdam: Elsevier

Classification and Topics

• Classification: Wirtschaft ; General Aggregative Models: Keynes; Keynesian; Post-Keynesian ; Investment; Capital; Intangible Capital; Capacity ; Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications ; Macro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy‡ ; Fiscal Policies and Behavior of Economic Agents: General
• Subject: ABM ; Confidence ; Contagion ; Expansionary Fiscal Consolidation ; Keynesian Macroeconomics

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Oliveira, Adriano Dos Reis M. Laureno ; Lima, Gilberto Tadeu ; Carvalho, Laura
• Event: Veröffentlichung
• (who): Elsevier
• (where): Amsterdam
• (when): 2020

Further information

• DOI: doi:10.1016/j.econ.2019.09.004
• Handle: http://hdl.handle.net/10419/266960
• Last update: 10.03.2025, 11:44 AM CET