Fiscal Multipliers in Italy: Evidence from Regional Data

Applying Panel SVAR modelling to 1995-2017 regional data, we estimate fiscal multipliers in Italy at national and sub-national level and find that expansionary fiscal policies produce positive and persistent effects on GDP. Fiscal multipliers remain larger than 1 even 10 years after a discretionary fiscal policy is implemented. Government investment stimulates output more than government consumption. Moreover, fiscal multipliers are higher in Centre-Northern regions than in Southern ones. Such evidence is confirmed when fiscal foresight is considered. Our findings support the Keynesian perspective, indicating that Italy should increase public investments to foster economic growth especially in the poorest Southern regions.