Are fiscal multipliers state-dependent? Insights from an agent-based model

This paper investigates the macroeconomic effects of fiscal policy under various economic conditions using a closed-economy agent-based model, in which macroeconomic outcomes emerge from the bottom up through interactions among heterogeneous agents across various markets. The results show that expansionary fiscal policies substantially boost aggregate output, with the public consumption multiplier well above one and the income tax multiplier roughly half as large. Public consumption exhibits pronounced nonlinearities, with multipliers particularly high during periods of economic slack and heightened financial fragility; in deep crises, public spending multipliers are nearly twice those observed under normal conditions. By contrast, the income tax multiplier is much less sensitive to the state of the economy. Overall, the analysis contributes to the ongoing debate on state-dependent fiscal policy effects, underscoring the potential critical role of direct demand-stimulation policies during economic downturns.