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Nonlinearities and expenditure multipliers in the Eurozone

Author

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  • Andrea Boitani

    (Università Cattolica del Sacro Cuore
    Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)

  • Salvatore Perdichizzi
  • Chiara Punzo

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.

Suggested Citation

  • Andrea Boitani & Salvatore Perdichizzi & Chiara Punzo, 2020. "Nonlinearities and expenditure multipliers in the Eurozone," DISCE - Working Papers del Dipartimento di Economia e Finanza def089, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  • Handle: RePEc:ctc:serie1:def089
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    More about this item

    Keywords

    Expenditure multipliers; State-dependent fiscal policy; Fiscal consolidation.;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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