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The Dynamic Effects of Monetary Policy and Government Spending Shocks on Unemployment in the Peripheral Euro Area Countries

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  • Pietro Dallari

    ()

  • Antonio Ribba

    ()

Abstract

In this paper we study the response of unemployment to monetary policy and fiscal shocks in the peripheral Euro-area countries. By applying the structural near-VAR methodology, we jointly model Euro area-wide and national variables while preserving the invariance of the set of Euro-area common shocks. Our main finding is that fiscal multipliers vary across countries and the results are consistent with the prediction of the standard New Keynesian model only in Italy and Greece. Instead, the multipliers exhibit a nonKeynesian sign in Ireland, Portugal and Spain. These results seem to be robust to alternative identification strategies. As far as the monetary policy shock is concerned, we find that it plays an important role, jointly with the other Euro-area wide shocks, as a long-term driver of national unemployment.

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  • Pietro Dallari & Antonio Ribba, 2019. "The Dynamic Effects of Monetary Policy and Government Spending Shocks on Unemployment in the Peripheral Euro Area Countries," Center for Economic Research (RECent) 141, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    • Handle: RePEc:mod:recent:141
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    Cited by:

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    2. Stefan Schiman & Harald Badinger, 2020. "Measuring Monetary Policy with Residual Sign Restrictions at Known Shock Dates," WIFO Working Papers 608, WIFO.
    3. Harald Badinger & Stefan Schiman, 2020. "Measuring Monetary Policy with Residual Sign Restrictions at Known Shock Dates," CESifo Working Paper Series 8558, CESifo.
    4. Harald Badinger & Stefan Schiman, 2020. "Measuring Monetary Policy with Residual Sign Restrictions at Known Shock Dates," Department of Economics Working Papers wuwp300, Vienna University of Economics and Business, Department of Economics.

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    More about this item

    Keywords

    Business Cycles; Fiscal Shocks; Unemployment; Euro area; Near-Structural VARs;
    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
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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