No. 839 - The effects of fiscal shocks with debt-stabilizing budgetary policies in Italy

by Francesco Caprioli and Sandro Momigliano
November 2011
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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.

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  1. 13 December 2011
    No. 839 - The effects of fiscal shocks with debt-stabilizing budgetary policies in Italy
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