Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/225061 
Year of Publication: 
2020
Series/Report no.: 
Working Paper No. 89
Publisher: 
Università Cattolica del Sacro Cuore, Dipartimento di Economia e Finanza (DISCE), Milano
Abstract: 
We analyze the non-linear effects of government spending for the Euro area in recession, by using local projection method and by testing whether the impact of the shock depends crucially on the levels of public debt or the depth of the recession. We provide three insights. First, expenditure multipliers are not strongly state-dependent but they are always above unity. Second, state dependency emerges as soon as deep recession is distinguished from ordinary downturns. Third, fiscal space matters: expenditure multipliers are larger in low fiscal space, high debt, South-EZ countries than in low-debt, North-EZ countries.
Subjects: 
Expenditure multipliers
State-dependent fiscal policy
Fiscal consolidation
JEL: 
E32
E62
Document Type: 
Working Paper

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