The opinions expressed in this paper are those of the authors and do not necessarily reflect those of the Banca d'Italia. We wish to thank Daniele Terlizzese and Andrea Tiseno, who discussed a preliminary version of this paper at the Workshop "Sensibilità al ciclo delle politiche di bilancio ed effetti sull'attività economica" (Rome, 27 October 2004), and the participants at the 7 th Banca d'Italia Workshop on Public Finance (Perugia, 31 March-2 April 2005) for very useful comments. We also

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... k Olivier Biau and Elie Girard for providing the values of the cumulative multiplier, not explicitly calculated in their study. Finally, we are grateful to