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On the numerical structure of local and nationwide government spending multipliers: what can we learn from the Greek crisis?
Authors
Eduardo Amaral Haddad
Natalia Q. Cotarelli
Vinicius A. Vale
January 10, 2023
Related topics: 
Economy
Macroeconomics and regulation
Europe

This Paper was originally published on tandfonline.com

 

It has been recognised that the fiscal multiplier is a function of structural features of the economy and policy reaction parameters. Moreover, the debate on the magnitude of the multiplier along the business cycle has also been the subject of disputed debates. On these grounds, we look at the Greek case by calibrating a NUTS-2 interregional general equilibrium model using data for distinct states of the Greek economy during the development of the recent crisis. Whether this matters for local and nationwide multipliers depends on qualitative differences in the numerical structure of the model. As governments have to decide how to conduct fiscal policy, our results on the Greek case provide insights to policymakers on the reach of their actions in a spatially integrated system.

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