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Monetization, wars, and the Italian fiscal multiplier

Author

Listed:
  • Michele Fratianni

    (Kelley School of Business, Bloomington, Indiana, USA and Universita' Politecnica delle Marche)

  • Federico Giri

    (Universita' Politecnica delle Marche)

  • Riccardo Lucchetti

    (Universita' Politecnica delle Marche)

  • Francesco Valentini

    (Universita' Politecnica delle Marche)

Abstract

This paper investigates the size of Italian fiscal multipliers under different business-cycle phases over the period 1872–2006. Using pre-WWII public defense expenditures as an instrument of total expenditures, we quantify the magnitude of the fiscal multiplier. Controlling for the business cycle phase, the multiplier is higher in recessions than in expansions. Furthermore, the multiplier is higher with the joint occurrence of monetization and slackness. Monetization alone does not exert a significant impact on the multiplier. Our results are confirmed using a timevarying parameter methodology that captures the country’s structural changes over a long stretch of time.

Suggested Citation

  • Michele Fratianni & Federico Giri & Riccardo Lucchetti & Francesco Valentini, 2022. "Monetization, wars, and the Italian fiscal multiplier," Mo.Fi.R. Working Papers 176, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    • Handle: RePEc:anc:wmofir:176
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    References listed on IDEAS

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    More about this item

    Keywords

    Fiscal multipliers; War defense spending; Slackness; Monetization; Timevarying parameters.;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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