Economics at your fingertips  

The sovereign crisis and Italy’s potential output

Andrea Gerali (), Alberto Locarno, Alessandro Notarpietro () and Massimiliano Pisani ()

Journal of Policy Modeling, 2018, vol. 40, issue 2, 418-433

Abstract: We evaluate the effects of the European sovereign crisis on Italian potential output (natural output, in the absence of nominal rigidities) by simulating a New Keynesian model. Our results are as follows. First, the 2011–2013 recession subtracted 1.6 percentage points from potential output growth and widened the output gap. Second, the 2013 reforms limited the reduction in output capacity to 1.4 points and enhanced long-run growth by 3. Third, once a balanced budget is achieved in the medium term, reductions in either labor or capital income taxes would boost potential output growth by 0.2 points per year.

Keywords: Sovereign risk; Fiscal policy; Potential output (search for similar items in EconPapers)
JEL-codes: E32 E62 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of Policy Modeling is currently edited by A. M. Costa

More articles in Journal of Policy Modeling from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2020-01-28
Handle: RePEc:eee:jpolmo:v:40:y:2018:i:2:p:418-433