Open AccessQuantifying multipliers in Italy: does fiscal policy composition matter?
Author(s) -
Matteo Deleidi
Publication year - 2021
Publication title -
oxford economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.68
H-Index - 69
eISSN - 1464-3812
pISSN - 0030-7653
DOI - 10.1093/oep/gpab028
Subject(s) - economics , fiscal policy , gross domestic product , investment (military) , government spending , real gross domestic product , consumption (sociology) , government expenditure , macroeconomics , order (exchange) , monetary economics , public expenditure , public finance , welfare , finance , market economy , social science , sociology , politics , political science , law
This article aims to estimate fiscal multipliers in Italy by assessing the effect of an increase in government expenditure and taxes on the Gross Domestic Product (GDP). By applying structural vector autoregressive modelling to Italian quarterly data for the 1995–2019 period, I show that expansionary fiscal policies produce positive effects on the GDP level. Estimated spending multipliers are higher than 1, and when government investment and consumption are compared, findings show that government investment has a larger effect on GDP than government consumption. Estimated tax multipliers are lower than 1, and tax-based policies are less effective in stimulating GDP than expenditure-based fiscal plans. My findings strongly support the Keynesian perspective and indicate that Italy should increase public investments considerably in order to foster economic growth.