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Mario Di Serio, Matteo Fragetta, Mr. Giovanni Melina, and Mr. Chris Papageorgiou

correlation, respectively. Our empirical findings are consistent with the abovementioned theoretical considerations and can be summarized as follows: (i) the size of the average cumulated multiplier depends on the r – g regime, with the difference between the size of the multiplier in the negative and positive r – g regimes being economically important and different from zero with high probability; (ii) this difference increases at time horizons beyond the first year; (iii) median estimates of the multipliers vary conditional on the specification: over the

Mario di Serio, Matteo Fragetta, and Mr. Giovanni Melina
We compute government spending multipliers for the Euro Area (EA) contingent on the interestgrowth differential, the so-called r-g. Whether the fiscal shock occurs when r-g is positive or negative matters for the size of the multiplier. Median estimates vary conditional on the specification, but the difference between multipliers in the negative and positive r-g regimes differs systematically from zero with very high probability. Over the medium run (5 years), median cumulated multipliers range between 1.22 and 1.77 when r-g is negative, and between 0.51 and 1.26 when r-g is positive. We show that the results are not driven by the state of the business cycle, the monetary policy stance, or the level of government debt, and that the multiplier is inversely correlated with r-g. The calculations are based on the estimates of a factor-augmented interacted panel vector-autoregressive model. The econometric approach deals with several technical problems highlighted in the empirical macroeconomic literature, including the issues of fiscal foresight and limited information.
Nicoletta Batini, Mario Di Serio, Matteo Fragetta, Mr. Giovanni Melina, and Anthony Waldron

the cumulative change in GDP divided by the cumulative change in spending on energy or land use, at various time horizons, following the approach proposed by Gordon and Krenn (2010) and Ramey and Zubairy (2018) . As discussed in the previous section, having normalized the variables of interest by real potential GDP circumvents any concerns related to ex-post conversion. Thus, cumulated multipliers are computed simply as the ratio of discrete approximations of the integral of the median IRFs of real output and government purchases over a given time horizon

Adalgiso Amendola, Mario di Serio, Matteo Fragetta, and Mr. Giovanni Melina
We build a factor-augmented interacted panel vector-autoregressive model of the Euro Area (EA) and estimate it with Bayesian methods to compute government spending multipliers. The multipliers are contingent on the overall monetary policy stance, captured by a shadow monetary policy rate. In the short run (one year), whether the fiscal shock occurs when the economy is at the effective lower bound (ELB) or in normal times does not seem to matter for the size of the multiplier. However, as the time horizon increases, multipliers diverge across the two regimes. In the medium run (three years), the average multiplier is about 1 in normal times and between 1.6 and 2.8 at the ELB, depending on the specification. The difference between the two multipliers is distributed largely away from zero. More generally, the multiplier is inversely correlated with the level of the shadow monetary policy rate. In addition, we verify that EA data lend support to the view that the multiplier is larger in periods of economic slack, and we show that the shadow rate and the state of the business cycle are autonomously correlated with its size. The econometric approach deals with several technical problems highlighted in the empirical macroeconomic literature, including the issues of fiscal foresight and limited information.
Adalgiso Amendola, Mario di Serio, Matteo Fragetta, and Mr. Giovanni Melina

Multipliers with the Lagged Shadow Rate and the Lagged Business Cycle 5 Robustness Checks on the Average Cumulated Government Spending Multipliers in Normal Times and at the ELB 6 Robustness Checks on the Distributions of Differences between Average Cumulated Government Spending Multipliers between Normal Times and the ELB 7 Robustness Checks on Conditional Correlations of Cumulated Multipliers with the Lagged Shadow Rate and the Lagged Business Cycle B.1 Conditional Correlations of Cumulated Multipliers with the Contemporaneous Shadow Rate and the Contemporaneous

Adalgiso Amendola, Mario di Serio, Matteo Fragetta, and Mr. Giovanni Melina

potential GDP of each country, respectively. In general, if our aggregate indicator is large and positive (large and negative), it means that most countries are in expansion (recession). B Additional Robustness Checks Table B.1: Conditional Correlations of Cumulated Multipliers with the Contemporaneous Shadow Rate and the Contemporaneous Business Cycle. Horizon H c o r r ( ϵ ^ t M H | b c , s r t − 1 ) c o r r

Adalgiso Amendola, Mario di Serio, Matteo Fragetta, Mr. Giovanni Melina, and Mr. Chris Papageorgiou

the fiscal shock occurs when the economy is at the ELB or in normal times; (ii) as the time horizon increases, multipliers diverge across the two regimes with normal times displaying a decay in the cumulated multiplier; (iii) at an intermediate horizon (three years), the average multiplier is about 1 in normal times and between 1.6 and 2.8 at the ELB, depending on the specification, with their difference being distributed largely away from zero; (iv) more generally, the multiplier is inversely correlated with the level of the shadow rate. We also find its size to be

Nicoletta Batini, Mario di Serio, Matteo Fragetta, and Mr. Giovanni Melina
This paper estimates multipliers for spending in clean energy and biodiversity conservation to help inform stimulus measures for a post-COVID-19 sustainable recovery. Using a new international dataset, part of which was especially assembled for this analysis, we find that every dollar spent on key carbon-neutral or carbon-sink activities—from zero-emission power plants to the protection of wildlife and ecosystems—can generate more than a dollar’s worth of economic activity. The estimated multipliers associated with green spending are about 2 to 7 times larger than those associated with non-eco-friendly expenditure, depending on sectors, technologies and horizons. These findings survive several robustness checks and suggest that ‘building back better’ could be a win-win for economies and the planet.