Stefano Siviero

The economic consequences of euro-area macro-modelling shortcuts

Should euro-area economies be modelled in an aggregate (area-wide) fashion or in a disaggregate (multi-country) one? This article tackles that question from both statistical and economic viewpoint. From a statistical viewpoint, aggregation bias criteria are found to signal that the degree of structural heterogeneity among euro-area economies is such that the loss of information entailed by an aggregate modelling approach may be far from trifling. From an economic viewpoint, we investigate the following issue. Are those statistically detectable heterogeneities of any practical relevance when it comes to supporting monetary policy decision-making? To provide an answer to this question, we compute simple optimal monetary policy reaction functions on the basis of either an aggregate model or a disaggregate one, and compare the associated welfare losses. The results suggest that the welfare under-performance of an area-wide-model-based rule is not only nonnegligible, but also robust with respect to a number of sensitivity analyses.

How deep are the deep parameters

Policy evaluation based on the estimation of dynamic stochastic general equilibrium models with aggregate macroeconomic time series rests on the assumption that a representative agent can be identified, whose behavioural parameters are independent of the policy rules. Building on earlier work by Geweke, the main goal of this paper is to show that the representative agent is in general not structural, in the sense that its estimated behavioural parameters are not policyindependent. The paper identifies two different sources of nonstructurality. The latter is shown to be a fairly general feature of optimizing representative agent rational expectations models estimated on macroeconomic data.

The Reaction of Fiscal Policy to the Crisis in Italy and Germany: Are they really polar Cases in the European Context?

The deep recession which hit the world economy towards the end of 2008 induced massive, internationally-coordinated policy responses, both monetary and fiscal. In this paper we examine public finance developments in Germany and Italy in 2009. We find that the larger stimulus measures adopted in Germany mostly compensated a more favorable underlying trend; overall, the cyclically-adjusted primary balances worsened by a similar extent in the two countries. We further estimate the automatic stabilisers to have had an impact on the deficit of similar magnitude in Germany and Italy. We then assess, on the basis of counterfactual simulations, to which extent discretionary measures and automatic stabilizers were able to mitigate the downturn in the two countries. Our results show that the public sector contrasted the fall in real GDP in 2009 by more than 2 percentage points in Germany and by 1 per cent in Italy. The difference in the stabilizing effect of the two public sectors reflects not only the different size of the stimulus measures, but also the higher fiscal multipliers associated with Germany.

Appraising the Effects of the Budget on the Economy with an Econometric Model: The Italian Fiscal Adjustment in the Nineties

This paper describes a procedure for assessing the effects of the budget on economic activity in the short term. Based on counterfactual simulations of an econometric model, the procedure takes into account more relationships between the budget and the economy than other, more synthetic indicators. It not only measures the impact of the budget on output but also evaluates how the budget affects prices and other macroeconomic variables. Moreover, the procedure provides estimates of the effects of specific features of the budget, such as its composition. The procedure is used to appraise the impact of the budget on the Italian economy in the period 1991-2000, using the Bank of Italy’s Quarterly Econometric Model. During the period of fiscal consolidation (1991-97), the impact on GDP growth was generally negative, averaging about -0.6 percentage points (with a spike of -1.4 points in 1995). As fiscal policy relaxed once Italy had succeeded in joining the Monetary Union, the impact on output growth became slightly positive, as in 1998 and 1999, or neutral, as in 2000. Even within the generally restrictive context, the budget exerted a mildly counter-cyclical influence. This result is in line with the findings of previous literature for the 1970s and 1980s. The composition of the budget often played a significant role, in some years amplifying the impact on the primary deficit, in others reducing or even offsetting it. In the period 1991-97, changes in the composition substantially increased the costs of fiscal adjustment. The average impact of the budget on inflation was basically nil in the decade. The results appear significantly different, both quantitatively and qualitatively, from those obtained using the synthetic budget indicators commonly used to assess the fiscal stance. Lastly, a number of additional experiments assess the sensitivity to changes in some key assumptions. In particular, a forward-looking specification of consumers’ behaviour and a forward-looking Taylor-type monetary policy reaction function were estimated and used in the counterfactual simulations. Neither results in significant modifications in the paper’s main conclusions.

Modelli matematici in azione: il caso di una banca centrale

Per decidere in modo oculato tra varie azioni disponibili occorre avere un’idea delle loro conseguenze, cosi da poterle confrontare e selezionare quelle piu gradite. Per anticipare le conseguenze delle varie azioni e poi necessario avere un’idea del funzionamento del sistema nel quale la decisione viene presa, un’idea del modo in cui le nostre azioni — le cause — generano delle conseguenze sulle altre grandezze del sistema — gli effetti.