In search of the Euro Area Fiscal Stance

Alice Albonico, Alessia Paccagnini and Patrizio Tirelli

No 324, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: This paper investigates the role of fiscal and monetary policies over the aggregate EMU business cycle, with a specific focus on fiscal policies. We estimate large multipliers for public consumption and transfers. In spite of this, fiscal policies were substantantially muted. This result is confirmed even for the post 2007 period. In fact fiscal policies did not complement the monetary policy stimulus in response to the financial crisis. Further, we cannot detect any substantial aggregate effect of austerity measures implemented in peripheral countries. Finally, the post-2007 surge in expenditure-to-GDP ratios was apparently determined by non-policy shocks that reduced output growth.

Keywords: DSGE; Limited Asset Market Participation; Bayesian Estimation; Euro Area; Business Cycle; Monetary Policy; Fiscal Policy (search for similar items in EconPapers)
JEL-codes: C11 C13 C32 E21 E32 E37 (search for similar items in EconPapers)
Pages: 47
Date: 2016-02-24, Revised 2016-02-24
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 (28)

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Related works:
Journal Article: In search of the Euro area fiscal stance (2016)
Working Paper: In search of the Euro area fiscal stance (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:mib:wpaper:324

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