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The transmission of the global financial crisis to the Italian economy. A counterfactual analysis, 2008-2010

Michele Caivano, Lisa Rodano and Stefano Siviero ()

No 64, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The world recession triggered by the financial crisis has impacted with extraordinary violence on economic activity in Italy.What has been the contribution of the various channels through which the crisis was transmitted to the Italian economy? What have been the effects stemming from the reaction of economic policies? To address these questions, our paper makes a counterfactual analysis of the Italian economy over the period 2008-2010, exploring a set of �no-crisis� scenarios. We estimate that the events prompted by the financial turmoil subtracted 6.5 percentage points from economic activity over the period 2008-2010. Specifically, crisis factors curtailed GDP growth by about 10 percentage points, while economic policies and automatic stabilizers mitigated the impact by about 3.5 percentage points. According to our results, the effects of the crisis were mostly �imported from abroad�; the worsening of domestic financing conditions and of the business and household climates played lesser - though not negligible - roles.

Keywords: global financial crisis; counterfactual simulations; business fluctuations. (search for similar items in EconPapers)
JEL-codes: E27 E37 E65 (search for similar items in EconPapers)
Date: 2010-04
New Economics Papers: this item is included in nep-eec and nep-mac
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