The Transmission of the Global Financial Crisis to the Italian Economy: A Counterfactual Analysis, 2008-2010

37 Pages Posted: 28 Oct 2010

Date Written: April 23, 2010

Abstract

The world recession triggered by the financial crisis has impacted with extraordinary violence on economic activity in Italy. What has been the contribution of the various channels through which the crisis was transmitted to the Italian economy? What have been the effects stemming from the reaction of economic policies? To address these questions, our paper makes a counterfactual analysis of the Italian economy over the period 2008-2010, exploring a set of “no-crisis” scenarios. We estimate that the events prompted by the financial turmoil subtracted 6.5 percentage points from economic activity over the period 2008-2010. Specifically, crisis factors curtailed GDP growth by about 10 percentage points, while economic policies and automatic stabilizers mitigated the impact by about 3.5 percentage points. According to our results, the effects of the crisis were mostly “imported from abroad”; the worsening of domestic financing conditions and of the business and household climates played lesser - though not negligible - roles.

Note: Downloadable document is in Italian.

Keywords: global financial crisis, counterfactual simulations, business fluctuations

JEL Classification: E27, E37, E65

Suggested Citation

Caivano, Michele and Rodano, Maria Lisa and Siviero, Stefano, The Transmission of the Global Financial Crisis to the Italian Economy: A Counterfactual Analysis, 2008-2010 (April 23, 2010). Bank of Italy Occasional Paper No. 64, Available at SSRN: https://ssrn.com/abstract=1698612 or http://dx.doi.org/10.2139/ssrn.1698612

Michele Caivano

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Maria Lisa Rodano

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Stefano Siviero (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Studi-Divisione Biblioteca e Pubblicazion
00184 Roma
Italy

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