| Abstract: |
This work analyses the effects of the slowdown that has hit Germany since 2018
on the Italian economy using data from Banca d’Italia’s Survey of
Inflation and Growth Expectations. First, we briefly argue that these two
economies are highly interconnected and describe the slowdown that has
hampered the German economy. Using a difference-in-differences strategy, we
show that since 2018, when the German economy weakened, Italian companies’
sentiment and assessment whose sales were oriented towards the German market
was comparatively worse than that of other companies. This finding suggests
that there is a transmission link between these two economies. Finally, using
a forecasting model, we provide a quantification of these effects that finds
that it would have been contemporaneous and relevant for GDP, lagging for the
total investment. In contrast, we do not find any significant employment
effect. |