A Macroeconomic Assessment of the Italian National Recovery and Resilience Plan

This paper aims at assessing the macroeconomic and distributional impact of the Italian National Recovery and Resilience Plan (NRRP), which translates the Next Generation EU into action. We use a large-scale dynamic stochastic general equilibrium model adapted to capture the effects of the NRRP instruments. The Plan is mapped onto the model by using granular information available at the Ministry of Economy and Finance. Our results suggest a sizable impact on key macroeconomic variables, which is mainly driven by investments. The impact on the functional distribution of income is initially adverse for profits, which decline in the early years because of the increase in labor and capital demand. However, profits suddenly move above their initial level after GDP increases. Overall, the selection and design of the public investment programs emerge as a crucial condition for the success of the Plan