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Fiscal Devaluation Scenarios: A Quantitative Assessment for the Italian Economy

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Author Info

  • Barbara Annicchiarico

    ()
    (CEIS, University of Rome "Tor Vergata")

  • Fabio Di Dio

    ()
    (Sogei S.p.A., IT Economia)

  • Francesco Felici

    ()
    (Ministero dell’Economia e delle Finanze, Dipartimento del Tesoro)

Abstract

We study the potential impact of fiscal devaluation policies on the Italian economy using IGEM, a dynamic general equilibrium model for the Italian economy developed at the Department of Treasury of the Italian Ministry of the Economy and Finance. The simulations show that fiscal devaluation policies are likely to produce short-run slight improvements on the external position of the economy, while the output gains seem to persist in the long run. Non-negligible distributional effects across households are also observed, since taxation on consumption tends to be regressive.

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Bibliographic Info

Paper provided by Tor Vergata University, CEIS in its series CEIS Research Paper with number 311.

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Length: 25 pages
Date of creation: 09 Apr 2014
Date of revision: 09 Apr 2014
Handle: RePEc:rtv:ceisrp:311

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Postal: CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma
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Keywords: Fiscal Devaluation; DGE; Structural Reforms; Italy;

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References

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  1. Jordi Galí & J. David López-Salido, 2003. "Understanding the Effects of Government Spending on Consumption," Working Papers 73, Barcelona Graduate School of Economics.
  2. Ruud de Mooij & Michael Keen, 2012. ""Fiscal Devaluation" and Fiscal Consolidation: The VAT in Troubled Times," NBER Chapters, in: Fiscal Policy after the Financial Crisis, pages 443-485 National Bureau of Economic Research, Inc.
  3. Emmanuel Farhi & Gita Gopinath & Oleg Itskhoki, . "Fiscal Devaluations," Working Paper 70976, Harvard University OpenScholar.
  4. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
  5. Isabell Koske, 2013. "Fiscal Devaluation – Can it Help to Boost Competitiveness?," OECD Economics Department Working Papers 1089, OECD Publishing.
  6. Martin S. Feldstein & Paul R. Krugman, 1990. "International Trade Effects of Value-Added Taxation," NBER Chapters, in: Taxation in the Global Economy, pages 263-282 National Bureau of Economic Research, Inc.
  7. Calmfors, Lars, 1998. "Macroeconomic Policy, Wage Setting, and Employment--What Difference Does the EMU Make?," Oxford Review of Economic Policy, Oxford University Press, vol. 14(3), pages 125-51, Autumn.
  8. Lukas Vogel, 2013. "The Impact of Structural Policies on External Accounts in Infinite-horizon and Finite-horizon Models," Review of International Economics, Wiley Blackwell, vol. 21(1), pages 103-117, 02.
  9. Forni, L. & Gerali, A. & Pisani, M., 2010. "Macroeconomic Effects Of Greater Competition In The Service Sector: The Case Of Italy," Macroeconomic Dynamics, Cambridge University Press, vol. 14(05), pages 677-708, November.
  10. Lusine Lusinyan & Dirk Muir, 2013. "Assessing the Macroeconomic Impact of Structural Reforms The Case of Italy," IMF Working Papers 13/22, International Monetary Fund.
  11. Calmfors, Lars, 1998. "Macroeconomic Policy, Wage Setting and Employment - What Difference Does the EMU Make?," Seminar Papers 657, Stockholm University, Institute for International Economic Studies.
  12. Barbara Annicchiarico & Fabio Di Dio & Francesco Felici, 2012. "Structural Reforms and the Potential Effects on the Italian Economy," CEIS Research Paper 227, Tor Vergata University, CEIS, revised 29 Mar 2012.
  13. Michael Keen & Ruud A. de Mooij, 2012. "Fiscal Devaluation and Fiscal Consolidation," IMF Working Papers 12/85, International Monetary Fund.
  14. Barbara Annicchiarico & Fabio Di Dio & Francesco Felici & Libero Monteforte, 2013. "IGEM: a Dynamic General Equilibrium Model for Italy," Working Papers 4, Department of the Treasury, Ministry of the Economy and of Finance.
  15. Calmfors, L., 1998. "Macroeconomic Policy, Wage Setting and Employment -What Differences Does the EMU Make?," Papers 657, Stockholm - International Economic Studies.
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