The effects of fiscal shocks with debt-stabilizing budgetary policies in Italy

Francesco Caprioli () and Sandro Momigliano
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Francesco Caprioli: Bank of Italy

No 839, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We study the effects of fiscal policy on macroeconomic developments in Italy over the period 1982-2010 with a Structural Vector Autoregression (SVAR) model. We include public debt and impose the government budget constraint in the estimation. In contrast with previous research we also include foreign demand, significantly improving estimation accuracy. We find that movements in debt induce stabilizing reactions in fiscal policy. In this context, expenditure and revenue shocks have significant effects on economic activity; these are stronger, as well as more precisely estimated and robust, for expenditure. Expenditure multipliers are higher when we exclude from our sample the initial years and, in particular, when we focus on the post-Maastricht period.

Keywords: fiscal policy; public debt; foreign demand; fiscal multipliers; VAR. (search for similar items in EconPapers)
JEL-codes: E62 H30 (search for similar items in EconPapers)
Date: 2011-11
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_839_11

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