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Fiscal Devaluation Scenarios: A Quantitative Assessment for the Italian Economy

  • 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)

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

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Length: 41 pages
Date of creation: 09 Apr 2014
Date of revision: 24 Sep 2014
Handle: RePEc:rtv:ceisrp:311
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  1. Paul Krugman & Martin Feldstein, 1989. "International Trade Effects of Value Added Taxation," NBER Working Papers 3163, National Bureau of Economic Research, Inc.
  2. Galí, Jordi & López-Salido, J David & Vallés Liberal, Javier, 2005. "Understanding the Effects of Government Spending on Consumption," CEPR Discussion Papers 5212, C.E.P.R. Discussion Papers.
  3. Farhi, Emmanuel & Gopinath, Gita & Itskhoki, Oleg, 2014. "Fiscal Devaluations," Scholarly Articles 12336336, Harvard University Department of Economics.
  4. 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.
  5. 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.
  6. Ruud de Mooij & Michael Keen, 2012. "'Fiscal Devaluation' and Fiscal Consolidation: The VAT in Troubled Times," NBER Working Papers 17913, National Bureau of Economic Research, Inc.
  7. 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.
  8. 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.
  9. Lusine Lusinyan & Dirk Muir, 2013. "Assessing the Macroeconomic Impact of Structural Reforms The Case of Italy," IMF Working Papers 13/22, International Monetary Fund.
  10. Lukas Vogel, 2012. "The impact of structural policies on external accounts in infinite-horizon and finite-horizon models," European Economy - Economic Papers 474, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  11. Isabell Koske, 2013. "Fiscal Devaluation – Can it Help to Boost Competitiveness?," OECD Economics Department Working Papers 1089, OECD Publishing.
  12. 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.
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