Monetization, wars, and the Italian fiscal multiplier

Michele Fratianni, Federico Giri, Riccardo (Jack) Lucchetti and Francesco Valentini

No 176, Mo.Fi.R. Working Papers from Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences

Abstract: This paper investigates the size of Italian fiscal multipliers under different business-cycle phases over the period 1872–2006. Using pre-WWII public defense expenditures as an instrument of total expenditures, we quantify the magnitude of the fiscal multiplier. Controlling for the business cycle phase, the multiplier is higher in recessions than in expansions. Furthermore, the multiplier is higher with the joint occurrence of monetization and slackness. Monetization alone does not exert a significant impact on the multiplier. Our results are confirmed using a timevarying parameter methodology that captures the country’s structural changes over a long stretch of time.

Keywords: Fiscal multipliers; War defense spending; Slackness; Monetization; Timevarying parameters. (search for similar items in EconPapers)
JEL-codes: E32 E58 E62 N13 N14 (search for similar items in EconPapers)
Pages: 26
Date: 2022-07
New Economics Papers: this item is included in nep-his
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