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Fiscal policy response to the COVID-19 pandemic in the euro area

Author

Listed:
  • Riccardo Tilli

    (Department of Communication and Social Research - Sapienza, University of Rome)

  • Paolo D'Imperio

    (Department of the Treasury - Italian Ministry of Economy and Finance)

  • Cristiana Fiorelli

    (Department of Economic and Legal Studies - University of Naples Parthenope)

Abstract

We estimate the macroeconomic impact of fiscal measures adopted in response to the COVID-19 crisis at the euro area level. Given the multitude of shocks occurred simultaneously during the pandemic, the fiscal stimulus is identified together with other supply- and demand-side shocks using a sign and zero restricted Bayesian vector autoregressive (VAR) model. Our results suggest that fiscal policy measures avoided a further collapse of GDP equal to 3.7 percentage points during the two years 2020-2021.

Suggested Citation

  • Riccardo Tilli & Paolo D'Imperio & Cristiana Fiorelli, 2023. "Fiscal policy response to the COVID-19 pandemic in the euro area," Economics Bulletin, AccessEcon, vol. 43(1), pages 366-372.
    • Handle: RePEc:ebl:ecbull:eb-22-00792
    as

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    References listed on IDEAS

    as
    1. Di Bartolomeo, Giovanni & D'Imperio, Paolo & Felici, Francesco, 2022. "The fiscal response to the Italian COVID-19 crisis: A counterfactual analysis," Journal of Macroeconomics, Elsevier, vol. 73(C).
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    3. Chudik, Alexander & Mohaddes, Kamiar & Raissi, Mehdi, 2021. "Covid-19 fiscal support and its effectiveness," Economics Letters, Elsevier, vol. 205(C).
    4. Falagiarda, Matteo & Prapiestis, Algirdas & Rancoita, Elena, 2020. "Public loan guarantees and bank lending in the COVID-19 period," Economic Bulletin Boxes, European Central Bank, vol. 6.
    5. Jonas E. Arias & Juan F. Rubio‐Ramírez & Daniel F. Waggoner, 2018. "Inference Based on Structural Vector Autoregressions Identified With Sign and Zero Restrictions: Theory and Applications," Econometrica, Econometric Society, vol. 86(2), pages 685-720, March.
    6. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1329-1368.
    7. Faria-e-Castro, Miguel, 2021. "Fiscal policy during a pandemic," Journal of Economic Dynamics and Control, Elsevier, vol. 125(C).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Fiscal policy; VAR; Covid-19;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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