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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. 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.
  2. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
  3. Jordi Galí & J. David López-Salido & Javier Vallés, 2002. "Understanding the effects of government spending on consumption," Economics Working Papers 911, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 2005.
  4. Annicchiarico, Barbara & Di Dio, Fabio & Felici, Francesco, 2013. "Structural reforms and the potential effects on the Italian economy," Journal of Policy Modeling, Elsevier, vol. 35(1), pages 88-109.
  5. Farhi, Emmanuel & Gopinath, Gita & Itskhoki, Oleg, 2011. "Fiscal Devaluations," CEPR Discussion Papers 8721, C.E.P.R. Discussion Papers.
  6. Calmfors, L., 1998. "Macroeconomic Policy, Wage Setting and Employment -What Differences Does the EMU Make?," Papers 657, Stockholm - International Economic Studies.
  7. 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.
  8. Lorenzo Forni & Andrea Gerali & Massimiliano Pisani, 2009. "Macroeconomic effects of greater competition in the service sector: the case of Italy," Temi di discussione (Economic working papers) 706, Bank of Italy, Economic Research and International Relations Area.
  9. 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.
  10. Isabell Koske, 2013. "Fiscal Devaluation – Can it Help to Boost Competitiveness?," OECD Economics Department Working Papers 1089, OECD Publishing.
  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. 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.
  13. 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.
  14. Lusine Lusinyan & Dirk Muir, 2013. "Assessing the Macroeconomic Impact of Structural Reforms The Case of Italy," IMF Working Papers 13/22, International Monetary Fund.
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