Fiscal multipliers and the risk of self-defeating fiscal consolidation. Evidence for the italian economy
In this paper we document the fiscal multipliers for the Italian economy and show how their size impinges on the degree of success of a fiscal consolidation. To this aim, we use the econometric model of the Italian Treasury (ITEM). By simulating a number of alternative fiscal policy impulses on both the public expenditure and the revenue side, we derive the corresponding dynamic fiscal multipliers and ascertain the impact of these measures on the primary indicator of public finance performance, namely the debt-to-GDP ratio.