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Fiscal Multipliers in Recession and Expansion. Regional Evidence from Italy

Author

Listed:
  • Gianluigi Coppola

    (University of Salerno)

  • Sergio Destefanis

    (University of Salerno)

  • Mario Di Serio

    (University of Salerno)

  • Matteo Fragetta

    (University of Salerno)

Abstract

This paper estimates the multipliers of two types of government spending in the 20 Italian administrative regions throughout 1960–2017, distinguishing between phases of expansion and recession. We derive regime- and region-specific multipliers through a nonlinear Bayesian heterogeneous panel threshold VAR model. We find that both government consumption and government investment multipliers are higher in recession than in expansion, especially for regions located in Central and Southern Italy. In seventeen regions, government investment multipliers exceed unity in recession phases and are generally higher than their government consumption counterparts regardless of the business cycle. An exploratory analysis of the region-specific multipliers in recession suggests that they are positively associated with the amount of unused resources and negatively associated with the presence of financial frictions. A negative role for automatic stabilisers emerges for government investment multipliers. No systematic influences show up for region-specific multipliers in expansion

Suggested Citation

  • Gianluigi Coppola & Sergio Destefanis & Mario Di Serio & Matteo Fragetta, 2022. "Fiscal Multipliers in Recession and Expansion. Regional Evidence from Italy," Discussion Paper series in Regional Science & Economic Geography 2022-05, Gran Sasso Science Institute, Social Sciences, revised Oct 2024.
    • Handle: RePEc:ahy:wpaper:wp31
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    More about this item

    Keywords

    Fiscal shocks; Regional multipliers; Asymmetric effects; Government spending categories; Bayesian heterogeneous panel threshold VAR;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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