HAL will be down for maintenance from Friday, June 10 at 4pm through Monday, June 13 at 9am. More information
Skip to Main content Skip to Navigation
Preprints, Working Papers, ...

Inequality, Financialisation and economic crises : an agent-based model

Abstract : By means of a macroeconomic model with an agent-based household sector and a stockflow consistent structure, we analyse the im-pact of rising income inequality on the likelihood of a crisis for different institutional settings. In particular, we study how economic crises emerge in the presence of different credit conditions and policy reactions to rising income disparities. Our simulations show the relevance of the degree of financialisation of an economy. In fact, when inequality grows, a Scylla and Charybdis kind of dilemma seems to arise: on the one hand, low credit availability implies a drop in aggregate demand and output; on the other hand, relaxed credit constraints and a higher willingness to lend result in greater financial instability and a debt-driven boom and bust cycle. We also point out that policy reactions play a key role: a real structural reform that tackles inequality, by means of a more progressive tax system, actually compensates for the rise in income disparities thereby stabilising the economy. Results also show that this is a better solution compared to a stronger fiscalpolicy reaction, which, instead, only leads to a larger duration of the boom and bust cycle.
Document type :
Preprints, Working Papers, ...
Complete list of metadata

https://hal-sciencespo.archives-ouvertes.fr/hal-03470036
Contributor : Spire Sciences Po Institutional Repository Connect in order to contact the contributor
Submitted on : Wednesday, December 8, 2021 - 9:21:13 AM
Last modification on : Friday, March 25, 2022 - 3:39:31 AM

File

wp2015-27.pdf
Files produced by the author(s)

Identifiers

Collections

Citation

Alberto Cardaci, Francesco Saraceno. Inequality, Financialisation and economic crises : an agent-based model. 2015. ⟨hal-03470036⟩

Share

Metrics

Record views

1

Files downloads

1