Fiscal Policy and the Banking System in Italy: Have Taxes, Public Spending and Banks Been Procyclical in the Long-Run? (original) (raw)
Related papers
The effects of fiscal policy in Italy: Evidence from a VAR model
European Journal of Political Economy, 2007
This paper studies the effects of fiscal policy on private GDP, inflation and the longterm interest rate in Italy using a structural vector autoregression model. To this end, a database of quarterly cash data for selected fiscal variables for the period 1982:1-2004:4 is constructed, largely relying on the information contained in the Italian Treasury Quarterly Reports. The main results of the study can be summarized as follows. A shock to government purchases of goods and services has a sizeable and robust effect on economic activity: an exogenous one per cent (in terms of private GDP) shock increases private real GDP by 0.6 per cent after 3 quarters. The response goes to zero after two years, reflecting with a lag the low persistence of the shock. The effects on employment, private consumption and investment are also positive. The response of inflation is positive but small and shortlived. In contrast, public wages, which in many studies are lumped together with purchases, have no significant effect on output, while the effects on employment turn negative after two quarters. Shocks to net revenue have negligible effects on all the variables.
Fiscal Dominance and Money Growth in Italy: The Long Record
Explorations in Economic History, 2001
Fiscal dominance, that is the extent to which government deficits condition the growth of the money supply, has been the prevailing regime in Italian monetary history from the creation of the state in 1861 to the 1980s. The nature of the institutional structure linking budget deficits to monetary base creation has changed over time. In the early days, the profit-seeking banks of issued exceeded intermittently the legal ceiling on their outstanding currency to lend to government. The influence of public finance on monetary policy became even stronger, first, in the 1930s and, later, in the 1970s. The joint event of an independent central bank and lower budget deficits are responsible for a reversal of fiscal dominance ion the 1980s and the 1990s. JEL Classification: E51, E58, N13, and N14. 1 1 where S = interest-bearing government securities, GE = total government expenditures, excluding interest payments, T = total tax revenues, and TR = transfer to government by the central bank (i.e., seigniorage).
A Quantitative Look at the Italian Banking System: Evidence from a New Dataset Since 1861
2013
The working paper series promotes the dissemination of economic research produced in the Department of the Treasury (DT) of the Italian Ministry of Economy and Finance (MEF) or presented by external economists on the occasion of seminars organized by MEF on topics of institutional interest to the DT, with the aim of stimulating comments and suggestions. The views expressed in the working papers are those of the authors and do not necessarily reflect those of the MEF and the DT.
Fiscal Policy and Public Debt Dynamics in Italy
2011
We examine the historical dynamics of government debt in Post-Unification Italy, from 1861 to 2009. Unit root tests for the debt-GDP ratio are unable to reject either the non stationarity or the stationarity null hypothesis. Controlling debt dynamics for fiscal feedback policies of the Barro-Bohn style, however, the debt-GDP ratio is found to be mean-reverting. Mean-reversion in the debt-GDP ratio is due not only to a nominal growth dividend, but also to a positive response of primary surpluses to variations in outstanding debt. There is indeed significant evidence that, over the history of Italy, fiscal policy makers have reacted to the accumulation of debt, taking corrective measures to rule out potential long-term sustainability problems.
RePEc: Research Papers in Economics, 2012
This paper reviews the main literature and evidence on the relevance of fiscal dominance in Italy in the last part of the 20th century and examines the evolution of the techniques of Treasury financing and of monetary targets. In the early 1970s budget deficits and monetary base creation were correlated, but the paper argues that monetary accommodation mostly reflected the considerable weight that the monetary authority assigned to real objectives and to fine-tuning policies. The monetary regime changed in the early 1980s: public deficits continued to expand, but monetary base creation associated with the Treasury decreased, money targets were met, disinflation was successfully initiated. According to the paper, the review of the Italian experience indicates that monetary policy effectiveness in achieving price stability requires the adoption of clear objectives and the independence of the central bank, but it does not require the latter's sphere of action to be limited to a specific set of operational tools. Furthermore, it signals that the independent management of monetary policy is not a sufficient incentive to foster fiscal responsibility.
Disaggregated Public Spending, GDP and Money Supply: Evidence for Italy
The aim of this article is to analyze the relationship between public spending and GDP controlling for the money supply in Italy for the period 1990-2010 at a disaggregated level, using a time series approach. After a brief introduction, a survey of the economic literature on this issue is shown, before estimating this nexus for ten items of public spending according to the COFOG functional classification. Cointegration tests reveal a long-run relationship between GDP, money supply and eight spending items. Moreover, Granger causality tests results show evidence in favour of Wagner's Law in two cases (Y→G), while a bi-directional flow has been found in only one case. The Keynesian hypothesis (G→Y) is supported by five series of spending. Some notes on the policy implications of this analysis conclude the paper.
Fiscal Policy and Public Debt Dynamics in Italy, 1861-2009
SSRN Electronic Journal, 2012
We examine the historical dynamics of government debt in Post-Unification Italy, from 1861 to 2009. Unit root tests for the debt-GDP ratio are unable to reject either the non-stationarity or the stationarity null hypothesis. Controlling debt dynamics for fiscal feedback policies of the Barro-Bohn style, however, the debt-GDP ratio is found to be mean-reverting. Mean-reversion in the debt-GDP ratio is due not only to a nominal growth dividend, but also to a positive response of primary surpluses to variations in outstanding debt. There is indeed significant evidence that, over the history of Italy, fiscal policy makers have reacted to the accumulation of debt, taking corrective measures to rule out potential long-term sustainability problems.
Tax Reforms and Fiscal Stabilisation in Italy
2003
The paper by Maria Rosaria Marino, Daniela Monacelli and Stefano Siviero proposes a methodology for evaluating the implications of changes in tax structure for automatic stabilisation. The approach is similar to the one used in the recent literature on optimal monetary policy rules. The features of the proposed approach are illustrated with an application to a reduced-scale steady-state version of the Bank of Italy Quarterly Econometric Model. The stabilising properties of different tax schemes are appraised on the basis of the variance of output oscillations associated with the income elasticities from various tax schemes; the variance is estimated by means of long-horizon stochastic simulations around a steady-state growth path. The results suggest that there is a value of the tax elasticity parameter which minimises the output gap variance. Higher values do not considerably worsen the stabilisation properties of the tax system while lower values may result in a sharp loss of stab...
Government Expenditures and Revenues in Italy in a Long-run Perspective
Journal of Quantitative Economics, 2019
using in a long-run perspective, using empirical tests on sustainability and solvency of the country’s fiscal policies. The results of unit root and stationarity tests show that government expenditures and revenues series are first-differences stationary. The empirical analysis considered both the entire period and two sub-periods (1862–1913, 1947–2013). Furthermore, we conduct tests on cointegration, which evidence that a clear long-run relationship between public expenditure and revenues emerges only for the years 1862–1913. In essence, the paper’s results reveal that Italy have sustainability problems in the republican age.