Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/266960 
Year of Publication: 
2020
Citation: 
[Journal:] EconomiA [ISSN:] 1517-7580 [Volume:] 21 [Issue:] 2 [Publisher:] Elsevier [Place:] Amsterdam [Year:] 2020 [Pages:] 233-254
Publisher: 
Elsevier, Amsterdam
Abstract: 
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.
Subjects: 
ABM
Confidence
Contagion
Expansionary Fiscal Consolidation
Keynesian Macroeconomics
JEL: 
E12
E22
E37
E71
H30
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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