The Sustainability of Fiscal Policy in Italy: A Long-Term Perspective (original) (raw)
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Sustainability of Italian budgetary policies: a time series analysis (1862-2013)
European Journal of Government and Economics
In this paper, we analyze the sustainability of Italian public finances using a unique database covering the period 1862-2013. This paper focuses on empirical tests for the sustainability and solvency of fiscal policies. A necessary but not sufficient condition implies that the growth rate of public debt should in the limit be smaller than the asymptotic rate of interest. In addition, the debt-to-GDP ratio must eventually stabilize at a steady-state level. The results of unit root and stationarity tests show that the variables are non-stationary at levels, but stationary in first-differences form, or I(1). However, some breaks in the series emerge, given internal and external crises (wars, oil shocks, regime changes, institutional reforms). Therefore, the empirical analysis is conducted for the entire period, as well as two sub‐periods (1862‐1913 and 1947‐2013). Moreover, anecdotal evidence and visual inspection of the series confirm our results. Furthermore, we conduct tests on coi...
Economic Research-Ekonomska Istraživanja, 2019
In this paper, we analyse the sustainability of Italian public finances using a unique database covering the period 1862-2013. This paper focuses on empirical tests for the sustainability and solvency of fiscal policies. A necessary but not sufficient condition implies that the growth rate of public debt should at the limit be smaller than the asymptotic rate of interest. In addition, the debt-to-G.D.P. ratio must eventually stabilise at a steady-state level. The results of unit root and stationarity tests show that the variables are non-stationary at levels, but stationary in first-differences form, or I(1). Some breaks in the series emerge, however, given internal and external crises (wars, oil shocks, regime changes, institutional reforms). Therefore, the empirical analysis is conducted for the entire period, as well as two sub-periods (1862-1913 and 1947-2013). Moreover, anecdotal evidence and visual inspection of the series confirm our results. Furthermore, we conduct tests on cointegration, which evidence that a long-run relationship between public expenditure and revenues is found only for the first sub-period (1862-1913). In essence, the paper's results reveal that Italy had sustainability problems in the Republican age. ARTICLE HISTORY
The Sustainability of Italian Public Debt and Deficit
In this paper, we analyse the sustainability of Italian public debt using a unique database, reconstructedbyForte (2011),whichcoverstheyears1862–2013.Thestudy focuses on empirical tests for the sustainability and solvency of Italian public finance. The results of unit root and stationarity tests show that public debt and deficit variables are non-stationary at levels, but stationary in first-differences form, or I(1). However, some breaks in the series emerge, given internal and external crises (wars, oil shocks, regime changes, institutional reforms). Therefore, the empirical analysis is conducted for the entire period, as well as two sub-periods (1862–1913 and 1947–2013). In essence, the paper’s results reveal that Italy has sustainability problems in the Republican age (1947-2013). Our Markov-switching dynamic regression modelindicatesthe existence of two distinct states, both for public debt and deficit, with means and standard deviations rather different. Both states are extremely persistent.
The sustainability of Italian fiscal policy: myth or reality?
Economic Research-Ekonomska Istraživanja
In this paper, we analyse the sustainability of Italian public finances using a unique database covering the period 1862-2013. This paper focuses on empirical tests for the sustainability and solvency of fiscal policies. A necessary but not sufficient condition implies that the growth rate of public debt should at the limit be smaller than the asymptotic rate of interest. In addition, the debt-to-G.D.P. ratio must eventually stabilise at a steady-state level. The results of unit root and stationarity tests show that the variables are non-stationary at levels, but stationary in first-differences form, or I(1). Some breaks in the series emerge, however, given internal and external crises (wars, oil shocks, regime changes, institutional reforms). Therefore, the empirical analysis is conducted for the entire period, as well as two sub-periods (1862-1913 and 1947-2013). Moreover, anecdotal evidence and visual inspection of the series confirm our results. Furthermore, we conduct tests on cointegration, which evidence that a long-run relationship between public expenditure and revenues is found only for the first sub-period (1862-1913). In essence, the paper's results reveal that Italy had sustainability problems in the Republican age.
Evaluating the sustainability of Italian public finances
The North American Journal of Economics and Finance, 2020
Are Italy's primary-surplus policies compatible with the sustainability of government debt? We address the question by examining historical budget data in post-unification Italy, from 1861 to 2016. Controlling for temporary output, temporary spending and world wartime periods in assessing whether primary surpluses significantly reacted to changes in debt, we find the following results: (i) the hypothesis of nonlinearity in the surplus-debt relationship significantly outperforms the hypothesis of linearity; (ii) there exists a threshold level in the debt-GDP ratio, approximately equal to 105 percent, above which Italian fiscal policy makers are concerned with corrective actions to avoid insolvency; (iii) the robustly positive reaction of primary surpluses to debt beyond the trigger point ensures fiscal sustainability.
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.
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.
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.