The Feedback between Real and Credit Markets

Obiettivo principale di questo lavoro è quello di ampliare le conoscenze teoriche riguardanti l’interrelazione fra il settore finanziario e quello reale. Nello specifico, la tesi analizza come l'allocazione del capitale possa influenzare sia la dinamica dei cicli macroeconomici che il tasso di crescita di lungo termine. Infatti, data la posizione delle banche fra la domanda e l’offerta di fondi, quest’ultime possono modificare l'equilibrio di mercato condizionando le scelte di famiglie, imprese ed istituzioni concorrenti. Il primo capitolo analizza un modello computazionale ad agenti (agent-based model), in cui la canalizzazione dei fondi dai risparmiatori agli investitori è influenzata da frizioni informative. L'intera dinamica aggregata risulta quindi essere guidata da fluttuazioni endogene nelle dimensioni dei bilanci delle banche, a causa della competizione sia sul mercato dei depositi che su quello dei prestiti. Di conseguenza, come evidenziato nel secondo capitolo, l'introduzione di un mercato interbancario, riducendo la pressione concorrenziale sulle passività degli intermediari, migliora le prestazioni del sistema. Tuttavia, il risultato è strettamente connesso alla topologia della rete. Infatti, il corretto funzionamento di un sistema finanziario altamente centralizzato dipende dallo stato dell'hub e viceversa. Infine, il terzo capitolo introduce un modello di equilibrio economico generale al fine di studiare gli effetti della finanziarizzazione sulla crescita aggregata e sul rischio sistemico. In particolare, il lavoro si sofferma sul ruolo svolto dal potere contrattuale degli intermediari. Infatti, le istituzioni finanziarie, assorbendo una maggior quota di reddito dagli imprenditori, possono ridurre l'incentivo delle nuove imprese ad entrare nel mercato. Di conseguenza, sia il tasso di crescita potenziale di lungo termine che la stabilità complessiva del sistema possono essere influenzati negativamente da un settore finanziario eccessivamente sviluppato.The main purpose of this thesis is to extend the theoretical knowledge on the relationship between the financial and the real sectors. Specifically, we investigate how the allocation of capital affects the dynamics of macroeconomic cycles and the long-term growth rate. Indeed, given the position of financial intermediaries between the demand and the supply of loanable funds, banks can change the market equilibrium influencing the choices of households and firms. Moreover, also the competitive pressure arising from incumbent institutions can play a major role in the definition of the final outcome. First, we develop a computational agent-based model, where the channeling of funds from savers to investors occurring through intermediaries is affected by information frictions. Since banks compete in both the deposit and the loan markets, the whole dynamics is driven by endogenous fluctuations in the size of the intermediaries balance sheet. Accordingly, the introduction of an interbank market, reducing the pressure on the liability side of banks' balance sheets, improves the performance of the system. However, the result depends on the topology of the network. Indeed, the functioning of a highly centralized financial system relies on the current state of the hub and vice-versa. Lastly, we develop a simple general equilibrium model to study the effects of financialization on aggregate growth and systemic risk. The main driver of this process is the bargaining power of intermediaries. Indeed, financial institutions, by absorbing a larger quota of income from entrepreneurs, can reduce the incentive for new firms to enter the market. As a result, both the long-term potential growth rate and the overall stability of the system can be negatively affected by an overdeveloped financial sector

Warming the MATRIX: a Climate Assessment under Uncertainty and Heterogeneity

This paper explores the potential impacts of climate change and mitigation policies on the Euro Area, considering the uncertainty and heterogeneity in both climate and economic systems. Using the MATRIX model, a multi-sector and multi-agent macroeconomic model, we simulate various climate scenarios by employing different carbon cycle models, damage functions, and marginal abatement curves found in the literature. We find that heterogeneous climate damages amplify both the magnitude and the volatility of GDP losses associated with global warming. By the end of the century, we estimate that assuming homogeneous shocks may underestimate the effects of climate change on aggregate output by up to one-third. Moreover, we find that the speed and feasibility of a low-carbon transition crucially depend on (i) the stringency of emission reduction targets, which determine the level of a carbon tax, and (ii) the rate of technological progress, which influences the shape of the abatement cost curve

Warming the MATRIX: a Climate Assessment under Uncertainty and Heterogeneity

This paper explores the potential impacts of climate change and mitigation policies on the Euro Area, considering the uncertainty and heterogeneity in both climate and economic systems. Using the MATRIX model, a multi-sector and multi-agent macroeconomic model, we simulate various climate scenarios by employing different carbon cycle models, damage functions, and marginal abatement curves found in the literature. We find that heterogeneous climate damages amplify both the magnitude and the volatility of GDP losses associated with global warming. By the end of the century, we estimate that assuming homogeneous shocks may underestimate the effects of climate change on aggregate output by up to one-third. Moreover, we find that the speed and feasibility of a low-carbon transition crucially depend on (i) the stringency of emission reduction targets, which determine the level of a carbon tax, and (ii) the rate of technological progress, which influences the shape of the abatement cost curve

Beyond Green Preferences: Alternative Pathways to Net-Zero Emissions in the MATRIX model

Green preferences are often regarded as crucial factors in facilitating the energy transition. However, it is unclear if they can alone propel an economy towards achieving a net-zero emissions outcome. In this study, we expand the multi-agent integrated assessment model MATRIX by incorporating considerations on implicit emissions in the decision-making process of consumers and firms. To evaluate the efficacy of those green preferences, we construct a range of experiments encompassing varying degrees of pro-environmental attitudes. Those scenarios are then compared to more conventional incentive-based climate policies, such as a carbon tax and a Cap-and-Trade mechanism, with and without a subsidy for abatement technology, each implemented at different stringency. Our findings indicate that only exceptionally high and unrealistic values of green preferences for both firms and consumers can achieve a net-zero outcome in the absence of an active policy. Moreover, the most favorable scenario in terms of environmental, economic and distributional outcomes emerges from a carbon tax accompanied by a moderate subsidy. Without subsidy, policies entail mainly negative economic and distributional consequences as firms transfer the increased costs to consumers

Beyond Green Preferences: Alternative Pathways to Net-Zero Emissions in the MATRIX model

Green preferences are often regarded as crucial factors in facilitating the energy transition. However, it is unclear if they can alone propel an economy towards achieving a net-zero emissions outcome. In this study, we expand the multi-agent integrated assessment model MATRIX by incorporating considerations on implicit emissions in the decision-making process of consumers and firms. To evaluate the efficacy of those green preferences, we construct a range of experiments encompassing varying degrees of pro-environmental attitudes. Those scenarios are then compared to more conventional incentive-based climate policies, such as a carbon tax and a Cap-and-Trade mechanism, with and without a subsidy for abatement technology, each implemented at different stringency. Our findings indicate that only exceptionally high and unrealistic values of green preferences for both firms and consumers can achieve a net-zero outcome in the absence of an active policy. Moreover, the most favorable scenario in terms of environmental, economic and distributional outcomes emerges from a carbon tax accompanied by a moderate subsidy. Without subsidy, policies entail mainly negative economic and distributional consequences as firms transfer the increased costs to consumers

Beyond green preferences: Alternative pathways to net-zero emissions in the MATRIX model

Green preferences are often regarded as crucial factors in facilitating the energy transition. However, it is unclear if they can alone propel an economy towards achieving a net-zero emissions outcome. In this study, we expand the multi-agent integrated assessment model MATRIX by incorporating considerations on implicit emissions in the decision-making process of consumers and firms. To evaluate the efficacy of those green preferences, we construct a range of experiments encompassing varying degrees of pro-environmental attitudes. Those scenarios are then compared to more conventional incentive-based climate policies, such as a carbon tax and a Cap-and-Trade mechanism, with and without a subsidy for abatement technology, each implemented at different stringency. Our findings indicate that only exceptionally high and unrealistic values of green preferences for both firms and consumers can achieve a net-zero outcome in the absence of an active policy. Moreover, the most favorable scenario in terms of environmental, economic and distributional outcomes emerges from a carbon tax accompanied by a moderate subsidy. Without subsidy, policies entail mainly negative economic and distributional consequences as firms transfer the increased costs to consumers

Energy price shocks and stabilization policies in a multi-agent macroeconomic model for the Euro Area

Soaring energy prices since fall 2021 have prompted European governments to introduce policy measures to support households and businesses. In this paper, we employ the MATRIX model, a multi-sector and multi-agent macroeconomic model calibrated on the Euro Area, to analyze the economic and distributional effects of different types of macro-stabilization policies in response to energy price shocks. Simulation results show that, in the absence of stabilization policies, an increase in fossil fuel price would lead to a sharp growth in price inflation and a severe contraction in real GDP, followed by a slow but steady recovery. We find no significant effects of generalized tax cuts and household subsidies, while firm subsidies promote a faster recovery but at the expense of greater financial instability in the medium term due to the resulting market distortions. If timely adopted, government-funded energy tariff reduction is the most effective policy in mitigating GDP losses at relatively low public costs, especially if coupled with an extra-profit tax on energy firms. Energy entrepreneurs benefit from rising fuel prices in all policy scenarios, but to a lesser extent under energy tariff cuts and windfall profits tax, favouring, in that case, workers and downstream firms owners

Charging the macroeconomy with an energy sector: an agent-based model

The global energy crisis that began in fall 2021 and the following spike in energy price constitute a major challenge for the world economy which risks undermining the post-COVID-19 recovery. In this paper, we develop and validate a new macroeconomic agent-based model with an endogenous energy sector to analyse the role of energy in the functioning of a complex adaptive system and assess the effects of energy shocks on the economic dynamics. The economic system is populated by heterogeneous agents, i.e., households, firms and banks, who take optimal decision rules and interact in decentralized markets characterized by limited information. After calibrating the model on US quarterly macroeconomic data, we investigate the economic and distributional effects of different types of energy shocks, that is an exogenous increase in the price of natural resources such as oil or gas and a decrease in the energy firms' productivity. We find that whereas the two energy shocks entail similar effects at the aggreagate level, the distribution of gains and losses across sectors is largely driven by the subsequent impact on the relative energy price, which varies depending on the type of shock. Our results suggest that, in order to design effective measures in response to energy crises, policymakers need to carefully take into account the nature of energy shocks and the resulting distributional effects