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)

Abstract: 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)
Pages: 31
Date: 2020-06
New Economics Papers: this item is included in nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Nonlinearities and expenditure multipliers in the Eurozone (2022)
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