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on Dynamic General Equilibrium |
| By: | Greg Kaplan |
| Abstract: | I summarize insights from heterogeneous-agent New Keynesian (HANK) models on the interaction between fiscal and monetary policy, with a focus on the macroeconomic experience of the early 2020s. I highlight three features of HANK economies—heterogeneous marginal propensities to consume, the failure of Ricardian equivalence, and an upward-sloping steady-state asset supply curve—that alter how fiscal and monetary forces interact relative to representative-agent models. I discuss two domains of policy: the effects of fiscal stimulus on inflation and the price level, and the fiscal consequences of changes in nominal interest rates. I illustrate these mechanisms in the context of the Covid pandemic by presenting simuluations from the calibrated HANK model in Kaplan and Miyahara (2025), which evaluates counterfactual scenarios for the United States for output, inflation, and the price level under alternative policy responses. The analysis underscores that monetary and fiscal policy are inescapably intertwined, and that HANK models provide a useful framework for quantifying these interactions. |
| Keywords: | heterogeneous agents; HANK; monetary policy; fiscal policy; fiscal-monetary interactions; fiscal theory of the price level |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:rba:rbaacp:acp2025-02 |
| By: | Hanno Kase; Matthias Rottner; Fabio Stohler |
| Abstract: | We introduce a novel approach for solving quantitative economic models: generative economic modeling. Our method combines neural networks with conventional solution techniques. Specifically, we train neural networks on simplified versions of the economic model to approximate the complete model's dynamic behavior. Relying on these less complex submodels circumvents the curse of dimensionality, allowing the use of well-established numerical methods. We demonstrate our approach across settings with analytical characterizations, nonlinear dynamics, and heterogeneous agents, employing asset pricing and business cycle models. Finally, we solve a high-dimensional HANK model with an occasionally binding financial friction to highlight how aggregate risk amplifies the precautionary motive. |
| Keywords: | machine learning, neural networks, nonlinearities, heterogeneous agents |
| JEL: | C11 C45 D31 E32 E52 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1312 |
| By: | Biais, Bruno (HEC Paris); Rochet, Jean Charles (University of Geneva); Villeneuve, Stéphane (University of Toulouse 1) |
| Abstract: | In our dynamic general equilibrium model, agents can invest in money and in a production technology exposed to shocks. If the government is non-benevolent and has a monopoly over money issuance it issues too much money, to finance excessive public expenditures. We study the effects of a cryptocurrency in limited supply but with crash risk. If the crash risk is not too large, competition from the cryptocurrency constrains the government's monetary policy. If the government is non-benevolent, this constraint improves citizens welfare, but if the government is rather benevolent competition from the cryptocurrency can lower citizens' welfare. |
| Keywords: | Cryptocurrency; Hyperinflation; Dynamic General Equilibrium; Denationalisation of money |
| JEL: | E42 |
| Date: | 2025–05–18 |
| URL: | https://d.repec.org/n?u=RePEc:ebg:heccah:1568 |
| By: | Trang Le; George Kudrna; John Piggott |
| Abstract: | This paper studies how the social norm of intergenerational support, where parents anticipate financial assistance from their adult children in old age, influences fertility and education investment decisions in developing countries. We develop a dynamic life-cycle model with uncertain labor income and endogenous fertility and education choices, incorporating expectations of private transfers driven by this norm. Using data from the Indonesian Family Life Survey, we estimate labor income profiles and income risks, account for parental financial constraints, and document the prevalence of intergenerational transfers in the 2000s. The model is calibrated to match key empirical patterns in fertility and schooling. Counterfactual simulations reveal that a weakening of this social norm leads to declines in both fertility and educational investment, particularly among lower-educated parents. Our findings underscore the central role of intergenerational transfers in shaping demographic and human capital outcomes and provide new insights into the persistence of educational inequality in developing economies. |
| Keywords: | fertility, human capital, education investment, intergenerational transfers, life-cycle model |
| JEL: | J13 J24 J62 D15 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-66 |
| By: | Sagiri KITAO; Nozomi TAKEDA |
| Abstract: | This paper develops a multi-region overlapping generations model with endogenous migration to quantify the macroeconomic and fiscal effects of foreign workers in aging Japan. Migration decisions are modeled explicitly, driven by cross-country differences in wages, demographics, and fiscal systems across Japan and the countries from which the migrants originate. The calibrated model replicates the sharp rise in Japan’s foreign workforce over the past decade and projects that their share will peak in the 2040s before declining as demographic and wage trends in source countries evolve. Foreign workers modestly mitigate the decline in labor supply and output and ease fiscal pressures, though their contribution remains partial. The findings highlight the importance of incorporating endogenous migration in assessments of long-run fiscal sustainability in aging economies. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25110 |
| By: | Olympia Bover (CEMFI); Nezih Guner (BANCO DE ESPAÑA AND CEMFI); Yuliya Kulikova (OIST AND IIASA); Alessandro Ruggieri (CUNEF UNIVERSIDAD); Carlos Sanz (BANCO DE ESPAÑA AND CEMFI) |
| Abstract: | Family-friendly policies aim to help women balance work and family life, encouraging them to participate in the labor market. How effective are such policies in increasing fertility? We answer this question using a search model of the labor market where firms make hiring, promotion and firing decisions, taking into account how these decisions affect workers’ fertility incentives and labor force participation decisions. We estimate the model using administrative data from Spain, a country with very low fertility and a highly regulated labor market. We use the model to study family-friendly policies and demonstrate that firms’ reactions result in a trade-off: policies that increase fertility reduce women’s participation in the labor market and lower their lifetime earnings. |
| Keywords: | family-friendly policies, fertility, flexibility, search and matching, human capital accumulation, gender gaps, welfare |
| JEL: | E24 J08 J13 J18 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2547 |
| By: | Rodrigo J. Raad (Cedeplar/UFMG); Kevin Reffett (Arizona State University); Lukasz Wozny (Warsaw School of Economics) |
| Abstract: | This paper develops a stationary Markov general equilibrium model with heterogeneous agents, complete markets, and no frictions or imperfections, yet capable of generating aggregate business cycle dynamics endogenously. In contrast to prior literature that relies on market imperfections such as adjustment costs, financial constraints, or informational frictions to explain macroeconomic fluctuations, we show that cyclical behavior can emerge in fully efficient economies. The mechanism stems from the endogenous, price-mediated interaction of capital, consumption, and asset transaction flows across agents with diverse preferences and endowments. These flows induce persistent relative price movements that feed back into aggregate allocations, amplifying coordinated expansions and contractions without any deviation from Pareto efficiency. We conclude that pro-cyclical or counter-cyclical stabilization policies in such settings may not only be ineffective, but potentially welfare-reducing, as they interfere with efficient allocations and risk exacerbating public debt through unnecessary interventions. |
| Keywords: | Multi-sector economy, recursive equilibrium, growth models, minimal state space, Real Business Cycles. |
| JEL: | C61 C62 C68 D50 D52 D58 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:cdp:texdis:td689 |
| By: | Ekaterina Shabalina |
| Abstract: | This paper studies how tax progressivity affects monetary policy. Through the lens of a heterogeneous agent model with nominal rigidities it shows that, firstly, higher tax progressivity increases natural rate due to a lower demand for precautionary savings. Secondly, the effect of tax progressivity on the potency of monetary policy is small with a higher progressivity implying a slightly better inflation-output trade-off. Distributional effects of monetary policy, however, are amplified with a higher tax progressivity. |
| Keywords: | tax progressivity; monetary policy transmission; natural rate of interest; heterogeneous agents |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:rba:rbaacp:acp2025-03 |
| By: | José E. Bosca; Javier Ferri; Margarita Rubio |
| Abstract: | We study the macroeconomic and welfare consequences of bond preference convergence within a monetary union. Using a two-country DSGE model calibrated to Germany and Spain, we compare two scenarios: convergence toward Spanish bond preferences and convergence toward German bond preferences. The direction of convergence proves decisive. When preferences shift toward those of Spain, union-wide private debt expands, long-run GDP declines, and macro-financial volatility rises, though inflation volatility falls. Welfare increases for the union as a whole in this scenario, with Germany gaining the most and Spain benefiting more modestly. By contrast, convergence toward German bond preferences reduces union-wide private debt and output volatility, but generates only moderate welfare gains for Germany and significant welfare losses for Spain. These results highlight that financial convergence does not yield uniform benefits. Its consequences depend on both the direction of convergence and its distributional effects across countries and households. The findings also point to a trade-off between welfare and stability, underscoring the need for macroprudential tools and fiscal arrangements to manage the risks associated with deeper convergence in bond preferences. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:fda:fdaddt:2025-12 |
| By: | Chao Gu (University of Missouri); Janet Hua Jiang (Bank of Canada); Liang Wang (University of Hawaii) |
| Abstract: | We construct a New Monetarist model with labor market search and identify two channels that affect the long-run relationship between inflation and unemployment. First, inflation lowers wages through bargaining because unemployed workers rely more heavily on cash transactions and suffer more from inflation than employed workers; this wage-bargaining channel generates a downward-sloping Phillips curve without assuming nominal rigidity. Second, inflation increases firms' financing costs, which discourages job creation and increases unemployment; this cash-financing channel leads to an upward-sloping Phillips curve. We calibrate our model to the U.S. economy. The improvement in firm financing conditions can explain the observation that the slope of the long-run Phillips curve has switched from positive to negative post-2000. |
| Keywords: | Credit Conditions, Inflation, Liquidity, Money, Phillips Curve, Unemployment |
| JEL: | E24 E31 E44 E51 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:hai:wpaper:202503 |
| By: | Gergő Motyovszki |
| Abstract: | US trade policy has taken a sharp protectionist turn under the second Trump administration, with the aim of boosting domestic manufacturing production, reducing the US trade deficit, and raising budgetary revenues ”paid by foreigners.” This paper assesses the macroeconomic consequences of recent US tariff announcements, based on quantitative simulations by the European Commission’s multi-region New Keynesian DSGE model, QUEST. Results indicate that, rather than aiding domestic production, tariff hikes weaken the US economy. While tariffs shift demand from imports towards US-produced goods, they also act as an adverse supply shock. In addition, the equilibrium terms-of-trade appreciation crowds out exports, and monetary tightening in response to inflationary pressures hurts domestic demand as well. Although tariff revenues generate additional fiscal space for the US government, only around a quarter of the burden falls on foreigners in the form of a US terms-of-trade gain. Finally, tariff hikes reduce US trade deficits only temporarily. The effects on EU GDP are moderately negative, driven mainly by weaker exports to the US. At the same time European exporters gain market share in third countries at the expense of less competitive American firms. US tariffs on other countries lead to trade diversion, slightly deepening the short-term economic losses in Europe, but reversing later on. A general tit-for-tat retaliation would deepen the negative impacts in both the US and the EU. Beyond the direct effects of tariffs, rising uncertainty and a loss of investor confidence in the US economy further aggravates the adverse economic consequences by tightening financing conditions. Sensitivity analyses highlight the role of tariff persistence, the currency of trade invoicing and the monetary policy response. |
| JEL: | E62 F13 F41 F42 F47 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:234 |
| By: | Matthias Burgert; Matthieu Darracq Pariès; Luigi Durand; Mario Gonzalez; Romanos Priftis; Oke Röhe; Matthias Rottner; Edgar Silgado-Gómez; Nikolai Stähler; Janos Varga |
| Abstract: | This paper presents a novel model comparison to examine the challenges posed by changes in carbon-intensive energy prices for monetary policy. The employed environmental monetary models have a detailed multi-sector structure. The comparison assesses the effects of both a temporary and a permanent energy price increase with a particular focus on the euro area and the United States. Temporary and permanent price shocks are both inflationary. However, the inflationary impact of the permanent shock depends on the underlying model assumptions and monetary policy response. The analysis also establishes that these models share large commonalities in their quantitative and qualitative results, while also pointing out cross-country differences. |
| Keywords: | climate change, monetary policy, multi-sector models, model comparison, DSGE models |
| JEL: | C54 E52 H23 Q43 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1313 |
| By: | Xie, Zoe Leiyu; Yu, Pei Cheng |
| Abstract: | his paper studies how the unemployment insurance system should be designed when considering costly self-control. The standard optimal unemployment insurance with dynamic moral hazard features declining benefits over the unemployment spell, without a lower bound on consumption (“immiseration”). As documented in the empirical literature, unemployed workers may be tempted to undervalue the future benefits of job search. The paper models this behavioral bias using costly self-control—a utility cost incurred when a worker’s job search choice deviates from the choice that maximizes current period utility and disregards future utility. Compared with the standard setup with moral hazard alone and without behavioral bias, the optimal system features lower benefit levels, a less rapid decline in benefits over the unemployment spell, a lower bound on consumption for the unemployed, and a one-time reward when a worker returns to work. The findings suggest that food assistance benefits and a back-to-work bonus in many U.S. states are broadly in line with such an optimal unemployment system. |
| Date: | 2025–12–01 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11265 |
| By: | Angelini, Elena; Darracq Pariès, Matthieu; Haertel, Thomas; Lalik, Magdalena; Aldama, Pierre; Brázdik, František; Damjanović, Milan; Fantino, Davide; Sanchez, Pablo Garcia; Guarda, Paolo; Kearney, Ide; Mociunaite, Laura; Saliba, Maria Christine; Sun, Yiqiao; Tóth, Máté Barnabás; Stoevsky, Grigor; Van der Veken, Wouter; Virbickas, Ernestas; Bulligan, Guido; Castro, Gabriela; Feješ, Martin; Grejcz, Kacper; Hertel, Katarzyna; Imbrasas, Darius; Kontny, Markus; Krebs, Bob; Opmane, Ieva; Rapa, Abigail Marie; Sariola, Mikko; Sequeira, Ana; Duarte, Rubén Veiga; Viertola, Hannu; Vondra, Klaus |
| Abstract: | This report provides a comprehensive overview of the models and tools used for macroeconomic projections within the European System of Central Banks (ESCB). These include semi-structural models, dynamic stochastic general equilibrium (DSGE) models, time series models and specialised satellite models tailored to particular questions or country-specific aspects. Each type of model has its own strengths and weaknesses and can help answer different questions. The models should therefore be seen as complementary rather than mutually exclusive. Semi-structural models are commonly used to produce baseline projection exercises, since they offer the flexibility to combine expert judgement with empirical data and have enough complexity and structure to provide a good representation of the economy. DSGE models, valued for their internal consistency and strong theoretical foundations, are another core forecasting tool used by some central banks, particularly to analyse counterfactuals. Time series models tend to be better suited to forecasting the short term, while scenario analysis and special events may require satellite models, extensions of existing models or even the development of new models tailored to the question at hand. The report also addresses the challenges to macroeconomic projections posed by data quality, including revisions and missing data, and describes the methods implemented to mitigate their effects. The report identifies “quick wins” to improve the projection process by enhancing the transparency and comparability of results through standardised reporting frameworks and better measurement of the judgement integrated in forecasts. The findings highlight the fundamental role of macroeconomic models in underpinning the ESCB’s projection exercises and ensuring that the Governing Council’s assessments and deliberations rest on coherent, granular and credible analysis of both demand-side and supply-side dynamics. JEL Classification: C30, C53, C54, E52 |
| Keywords: | economic models, forecasting, macroeconometrics, monetary policy |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2025381 |
| By: | Beatrice Pataracchia; Philipp Pfeiffer; Marco Ratto; Jan Teresiński |
| Abstract: | We estimate a large-scale open-economy DSGE model to assess the role of energy commodity prices in euro area inflation and short-run output dynamics. The model features rich pass-through from energy import prices to consumer and producer prices, distinguishing between natural gas and crude oil and their use in both consumption and production. Transmission is quantified through direct effects on household energy consumption, indirect effects via energy as an intermediate input, and second-round general-equilibrium effects through, for example, wages and markups. Bayesian estimation suggests that in 2022, shocks to energy import prices alone added about 2 percentage points (pps) to inflation. Integrating broader energy measures increases this contribution to over half of the 2021–22 surge (to around 3 pps). Backward-looking indexation, often associated with wage–price spirals, is estimated to be limited. The post-2020 surge leaves substitution elasticities broadly unchanged but points to a steeper Phillips curve and slightly lower real wage rigidity. |
| JEL: | C51 E31 F41 Q43 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:233 |
| By: | Tatsuro Senga (KEIO UNIVERSITY AND QUEEN MARY UNIVERSITY OF LONDON); Iacopo Varotto (BANCO DE ESPAÑA) |
| Abstract: | Does micro-level investment irreversibility amplify or dampen business cycles? We show this depends on the source of aggregate risk. Investment irreversibility reduces fluctuations in both aggregate output and investment when firm-level idiosyncratic shocks aggregate up to economy-wide effects. This contrasts with models driven by aggregate productivity shocks, where irreversibility has little effect on volatility. The key is whether idiosyncratic shocks are suffi ciently volatile to cause the irreversibility constraint to bind cyclically for a significant mass of firms. If so, investment irreversibility hampers productivity-enhancing capital reallocation and reduces business cycle volatility. Moreover, household consumption smoothing is impeded when firms cannot adjust capital optimally, increasing real wage volatility. This labor market effect, combined with capital misallocation, reduces aggregate output volatility by 22 percent and investment volatility by 60 percent. These results highlight the importance of considering the source of economic volatility when assessing investment frictions. We provide empirical support for these predictions using firm-level investment data from Compustat. |
| Keywords: | investment irreversibility, business cycles, idiosyncratic shocks, capital misallocation |
| JEL: | D25 E22 E23 E32 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2546 |
| By: | Ryoji Ohdoi (School of Economics, Kwansei Gakuin University) |
| Abstract: | This paper studies how international asymmetries in population aging shape cross-country technology gaps and global growth. I develop a two-country, two-sector overlapping-generations model with endogenous technological progress free from scale effects. The analysis shows that, in the long-run equilibrium, the faster-aging country's relative technology declines through two mechanisms: reduced per capita labor supply and a reallocation of employment toward the non-tradable sector. Consequently, policies aimed solely at increasing labor-force participation are insufficient to prevent such relative technological decline, because the latter mechanism persists. Numerical simulations confirm these mechanisms and reveal potentially non-monotonic effects on global growth under large demographic asymmetries. I also quantify Japan's relative technological decline due solely to differential aging by calibrating the two countries to Japan and the United States. |
| Keywords: | International asymmetries in population aging; Overlapping generations; Endogenous technological progress without scale effects; Non-tradable goods; Sectoral reallocation |
| JEL: | F43 J11 O30 O41 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:kgu:wpaper:302 |
| By: | Hui, Xitong |
| Abstract: | Can rising asset prices reduce wealth inequality? This paper builds a continuous-time heterogeneous-agent general equilibrium in which entrepreneurs hold risky private capital and traditional savers hold safe assets. Safe-asset expansions—via financial innovation, public debt, or a stable equity bubble—operate through a single pass-through: they lower entrepreneurs’ undiversified risk exposure, compress risk premia, and raise the interest rate. This slows entrepreneurial wealth accumulation and redistributes wealth toward traditional savers, so inequality falls even as risky asset valuations rise. Savers gain unambiguously. Entrepreneurs’ welfare is state-dependent: when their wealth share is low, they prefer a higher risk premium and lose from safe-asset expansions; once sufficiently wealthy, they prefer a higher interest rate that protects a larger wealth base and gain. JEL Classification: D31, G12, E21, E44 |
| Keywords: | asset prices, interest rates, safe assets, wealth inequality, welfare |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253162 |
| By: | Lukas B. Freund |
| Abstract: | Production increasingly requires specialized expertise. To study the macroeconomic implications, I develop a tractable theory in which firms assemble teams of workers with heterogeneous task-specific skills. Deriving the firm’s production function from optimal task assignment shows that output is maximized when coworkers excel at different tasks yet possess similar overall talent. Crucially, greater skill specificity, while raising potential productivity, endogenously amplifies talent complementarities, i.e., the productivity loss from talent mismatch. This promotes talent concentration into select firms with “superstar teams, ” though search frictions prevent perfect sorting. Using German panel micro data, I document industry patterns consistent with this mechanism and calibrate the model. The quantified model shows that, first, growing skill specificity since the mid-1980s has amplified sorting, explaining a significant share of the widely documented “firming up of inequality”. Second, “Smithian” productivity gains from specialization are muted when labor market frictions impede the matching of coworkers with complementary expertise. |
| Keywords: | firms, inequality, productivity, specialization, teams |
| JEL: | D21 D24 E24 J31 J64 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12303 |
| By: | Marta Grzeskiewicz |
| Abstract: | Understanding household behaviour is essential for modelling macroeconomic dynamics and designing effective policy. While heterogeneous agent models offer a more realistic alternative to representative agent frameworks, their implementation poses significant computational challenges, particularly in continuous time. The Aiyagari-Bewley-Huggett (ABH) framework, recast as a system of partial differential equations, typically relies on grid-based solvers that suffer from the curse of dimensionality, high computational cost, and numerical inaccuracies. This paper introduces the ABH-PINN solver, an approach based on Physics-Informed Neural Networks (PINNs), which embeds the Hamilton-Jacobi-Bellman and Kolmogorov Forward equations directly into the neural network training objective. By replacing grid-based approximation with mesh-free, differentiable function learning, the ABH-PINN solver benefits from the advantages of PINNs of improved scalability, smoother solutions, and computational efficiency. Preliminary results show that the PINN-based approach is able to obtain economically valid results matching the established finite-difference solvers. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.20283 |
| By: | Christian Buelens; Leonor Coutinho; Adrian Ifrim; Marco Ratto |
| Abstract: | This paper assesses the macroeconomic impact of deglobalisation scenarios using an estimated three-region global dynamic general equilibrium framework, considering the euro area, the US, and the rest of the world. We focus on two structural deglobalisation trend scenarios: first, exogenous disruptions to inter-regional trade, and second, greater inward orientation that is reflected in a higher home bias. Our simulations reveal that the trade compression caused by deglobalisation significantly reduces economic activity globally and in the individual blocs. Transition dynamics are typically stagflationary and are often characterised by substantial exchange rate fluctuations. We show that bilateral trade disruptions have both direct and indirect effects, which intensify the more regions are open and integrated into global value chains. Additionally, we find that inward orientation is generally costly when occurring universally. However, a unilateral increase in a region’s home bias that entails no other costs, might spur economic activity in the region implementing it. This benefit is at a disproportionate expense to others, as their export markets contract and their currencies devalue. However, if the preference shift entails efficiency costs, in terms of stifled competition or more rigid labour markets, a favourable unilateral outcome is less likely to materialise. Finally, we discuss the international transmission of shocks and show that in a less globalised steady state, external shocks produce less volatility for the euro area economy in terms of GDP and inflation, but there is also less external attenuation of domestic shocks. One implication is that certain structural trends observed in recent decades, such as the ‘globalisation of inflation’, may weaken as a result. |
| JEL: | F13 F41 F62 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:227 |
| By: | Claudia Fernandez Garcia; Johannes Schuffels; Valeria Ferreira; Luis Pedauga; Jose Manuel Rueda Cantuche; Daria Ciriaci |
| Abstract: | This paper examines the expected economic impact of the Recovery and Resilience Facility (RRF) in the Netherlands in the medium term and its sectoral and regional distribution, leveraging a novel sectoral database and the dynamic general equilibrium FIDELIO model. The overall results show that the RRF has a total expected impact in the Dutch economy of EUR 13 bn in the medium term, with EUR 4.3 bn in direct impact and EUR 8.8 bn in spillover effects from other Member States' plans. The Dutch 'Construction' sector is expected to benefit the most from the Dutch RRP. This is largely driven by an energy efficiency subsidy, for which we provide evidence that the largest effects in terms of economic impact can be expected in the more rural parts of the country. Regarding spillovers from other Member States’ RRPs, the ‘Wholesale trade’ sector is expected to benefit the most due to Rotterdam’s central role as a logistics hub for the EU. The impact of the RRF in the Netherlands is spread out over the country, with significant differences across sectors. Overall, the findings underscore the importance of considering the EU as a whole when assessing the RRF's impact and highlight that potential effects of the RRF in open and competitive economies are significantly larger than their initial allocation. |
| JEL: | C82 E61 E62 F15 F17 F41 F42 F62 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:232 |
| By: | Karsten Chipeniuk; Marcin Kolasa; Jesper Lindé; Elvis Ludvich; Melanie Quigg |
| Keywords: | quantitative easing; negative policy rates; effective lower bound; open-economy model |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:rba:rbaacp:acp2025-07 |