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In search of the Euro Area Fiscal Stance

Listed author(s):
  • Alice, Albonico
  • Alessia, Paccagnini
  • Patrizio, Tirelli

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.

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File URL: http://dems.unimib.it/repec/pdf/mibwpaper324.pdf
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Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 324.

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Length: 47
Date of creation: 24 Feb 2016
Date of revision: 24 Feb 2016
Handle: RePEc:mib:wpaper:324
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  28. repec:ecb:ecbwps:20111429 is not listed on IDEAS
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