4Non-technical summary 5

In a standard linear structural VAR framework we analyse the size and sign of fi scal multipliers in the euro area, using a newly available quarterly dataset of fi scal variables for the period 1981-2007. From a policy perspective, the analysis of fi scal multipliers in "average times" provides insights on the impact of both fi scal stimulus and fi scal consolidation measures, provided "good" and "bad" times are on average similar. * The views expressed in this paper are those of the authors and do not necessarily refl ect those of the European Central Bank, the Bank of Spain or the Eurosystem. We thank Pablo Hernández de Cos, Ad van Riet, Michele Lenza, seminar participants at the Bank of Spain, the ECB, the Working Group of Public Finance (WGPF) and Banca d'Italia Perugia Workshop, as well as an anonymous referee for useful comments.

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Non-technical summary 1 Introduction 2 The data 3 The (S)VAR model 3.1 Specifi cation 3.2 Identifi cation strategy 3.3 Possible weaknesses of the SVAR approach to model fi scal policy shocks 4 The effects of government spending and tax shocks 4.1 Interpreting the fi scal shocks 4.2 The baseline VAR 4.3 Financial and fi scal stress and the impact of fi scal policy 4.4 Responses of private consumption and investment to fi scal shocks 4.5 The effects of different expenditure and net-tax components 4.6 Robustness checks 5 Conclusions Appendix References European Central Bank Working Paper Series CONTENTS 4 ECB Working Paper Series No 1133

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