The fiscal cost of financial instability

Chiarella, C; Di Guilmi, C

The fiscal cost of financial instability

Chiarella, C Di Guilmi, C

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Publication Type:: Journal Article
Citation:: Studies in Nonlinear Dynamics and Econometrics, 2012, 16 (4)
Issue Date:: 2012-09-01

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Field	Value	Language
dc.contributor.author	Chiarella, C	en_US
dc.contributor.author	Di Guilmi, C https://orcid.org/0000-0001-7786-039X	en_US
dc.date.issued	2012-09-01	en_US
dc.identifier.citation	Studies in Nonlinear Dynamics and Econometrics, 2012, 16 (4)	en_US
dc.identifier.issn	1081-1826	en_US
dc.identifier.uri	http://hdl.handle.net/10453/22010
dc.description.abstract	This paper presents an agent based model that investigates the possible outcomes of different fiscal and regulatory policies in a financially fragile economy. We analyse the consequences of the attempt by the government to counteract a downturn when it ignores the debt dynamics as modelled by Fisher and Minsky. In particular, we formulate an educated guess about the burden that the government and the taxpayer must bear when a bubble bursts, and its relationship with the extent of government intervention and the taxation system. We also evaluate the outcomes of possible alternatives or complementary regulatory policies. We model four different scenarios treating separately a tax on profits and a tax on private wealth and, for both of them, we specify two cases depending on whether the financial system is able to autonomously generate liquidity. Therefore, we can assess the effect of endogenous money and endogenous credit on the different stabilization policies. Copyright © 2012 De Gruyter.	en_US
dc.relation.ispartof	Studies in Nonlinear Dynamics and Econometrics	en_US
dc.relation.isbasedon	10.1515/1558-3708.1970	en_US
dc.subject.classification	Econometrics	en_US
dc.title	The fiscal cost of financial instability	en_US
dc.type	Journal Article
utslib.citation.volume	4	en_US
utslib.citation.volume	16	en_US
utslib.for	1403 Econometrics	en_US
utslib.for	0102 Applied Mathematics	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Economics Discipline
utslib.copyright.status	closed_access
pubs.issue	4	en_US
pubs.publication-status	Published	en_US
pubs.volume	16	en_US

Abstract:

This paper presents an agent based model that investigates the possible outcomes of different fiscal and regulatory policies in a financially fragile economy. We analyse the consequences of the attempt by the government to counteract a downturn when it ignores the debt dynamics as modelled by Fisher and Minsky. In particular, we formulate an educated guess about the burden that the government and the taxpayer must bear when a bubble bursts, and its relationship with the extent of government intervention and the taxation system. We also evaluate the outcomes of possible alternatives or complementary regulatory policies. We model four different scenarios treating separately a tax on profits and a tax on private wealth and, for both of them, we specify two cases depending on whether the financial system is able to autonomously generate liquidity. Therefore, we can assess the effect of endogenous money and endogenous credit on the different stabilization policies. Copyright © 2012 De Gruyter.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/22010