Fiscal Multipliers in Recession and Expansion. Regional Evidence from Italy

Gianluigi Coppola (), Sergio Destefanis, Mario Di Serio () and Matteo Fragetta ()
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Gianluigi Coppola: University of Salerno
Mario Di Serio: University of Salerno

No 2022-05, Discussion Paper series in Regional Science & Economic Geography from Gran Sasso Science Institute, Social Sciences

Abstract: This paper estimates the multipliers of two types of government spending in the 20 Italian administrative regions throughout 1960–2017, distinguishing between phases of expansion and recession. We derive regime- and region-specific multipliers through a nonlinear Bayesian heterogeneous panel threshold VAR model. We find that both government consumption and government investment multipliers are higher in recession than in expansion, especially for regions located in Central and Southern Italy. In seventeen regions, government investment multipliers exceed unity in recession phases and are generally higher than their government consumption counterparts regardless of the business cycle. An exploratory analysis of the region-specific multipliers in recession suggests that they are positively associated with the amount of unused resources and negatively associated with the presence of financial frictions. A negative role for automatic stabilisers emerges for government investment multipliers. No systematic influences show up for region-specific multipliers in expansion

Keywords: Fiscal shocks; Regional multipliers; Asymmetric effects; Government spending categories; Bayesian heterogeneous panel threshold VAR (search for similar items in EconPapers)
JEL-codes: C33 E62 H50 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2022-09, Revised 2024-10
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Persistent link: https://EconPapers.repec.org/RePEc:ahy:wpaper:wp31

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