We evaluate the macroeconomic effects of a fiscal devaluation in Italy by simulating a dynamic general equilibrium model of the Italian economy and the euro area. Fiscal devaluation would increase Italian GDP. Economic activity would benefit from the strengthening of external trade and capital accumulation, while consumption would decrease because of higher taxes. The lowering of the tax wedge and stronger economic activity would favour labour demand. The unemployment rate would decrease.
Published in 2021 in: The Manchester School, v. 89, S1, pp. 97-130
