Nonlinearities and expenditure multipliers in the Eurozone
Andrea Boitani (),
Salvatore Perdichizzi and
Chiara Punzo ()
No def089, DISCE - Working Papers del Dipartimento di Economia e Finanza from Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE)
We analyze the non-linear eﬀects of government spending for the Euro area in recession, by using local projection method and by testing whether the impact of the shock depends crucially on the levels of public debt or the depth of the recession. We provide three insights. First, expenditure mul-tipliers are not strongly state-dependent but they are always above unity. Second, state dependency emerges as soon as deep recession is distinguished from ordinary downturns. Third, ﬁscal space matters: expenditure multi-pliers are larger in low ﬁscal space, high debt, South-EZ countries than in low-debt, North-EZ countries.
Keywords: Expenditure multipliers; State-dependent ﬁscal policy; Fiscal consolidation. (search for similar items in EconPapers)
JEL-codes: E32 E62 (search for similar items in EconPapers)
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