This version: June 1994IS MONEY NEUTRAL? SOME EVIDENCE FOR ITALY * (original) (raw)
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The stagnation of the Italian economy since the mid-1990s can only be understood with reference to the great transformations that occurred in the previous two decades. This long interval was characterized by a process of rapid modernization and, also, by economic policy mismanagement. These changes generated an inefficient institutional model, a dysfunctional variant of the coordinated market economies of Continental Europe. In the mid-1990s Italian policymakers had to make painful and swift fiscal and institutional adjustments to correct economic imbalances and comply with the provisions of the Maastricht Treaty. These adjustments were, however, incomplete and did not solve the two most important problems that explain the fragility of the Italian economy in the financial crisis: stagnation of productivity and little internal adjustment (in terms of wage dynamics and reallocation of labour and capital across sectors and firms) to fend off the consequences of a loss of competitiveness in world markets. RIASSUNTO La stagnazione dell'economia italiana dalla metà degli anni '90 può essere compresa solo con riferimento alle trasformazioni avvenute nelle due decadi precedenti. Questo lungo intervallo è caratterizzato da un rapido processo di modernizzazione, ma anche da politiche economiche incoerenti e dissipatrici, che hanno generato un modello istituzionale inefficiente, una variante "disfunzionale" delle economie di mercato coordinate dell'Europa continentale. Alla metà degli anni '90 i governi italiani hanno dovuto avviare aggiustamenti fiscali e istituzionali rapidi e dolorosi per cercare di correggere gli squilibri economici e soddisfare le regole del trattato di Maastricht. Tali aggiustamenti sono stati, però, incompleti e non hanno risolto i due problemi più importanti che spiegano la fragilità dell'economia italiana nella crisi finanziaria: la stagnazione della produttività e la mancanza di un adeguato aggiustamento interno (in termini di dinamiche salariali e di riallocazione del lavoro e del capitale tra settori produttivi e imprese) per limitare le conseguenze della progressiva perdita di competitività sui mercati internazionali.
Disinflation in Italy: An analysis with the econometric model of the bank of Italy
Journal of Policy Modeling, 1988
This paper offers a quitltitative analysis of the determinants of the disinflation process in Italy between 1980 and 1986, using the quarterly model of Banca d'Italia. By means of conditional simulations, the contribution of international factors, such z< the drop in oil prices, and the role played by government policies are identified. In particular, the effects of monetary and exchange rate policies and the policy of "precommitment" of prices and wages on the disinflation process are evaluated. The role of the policy on publicly regulated prices is also analyzed. It is found that a more accommodating exchange rate policy would have amplified the inflationary impact of the second oil shock while allowing only for small gains in income. The gradualness of the restrictive monetary policy is also evaluated. Finally, the complementarity between monetary policy and exchange rate policy in the period, given the constraint imposed by the balance of payments, is emphasized. *This is a condensed version of a working paper that is going to be published in Italian in the Banca d'ltaha series of "Contributi all'analisi economica." The authors are grateful to Piero Rubino for productive discussions and to Albert Ando and Giampaolo Galli for useful suggestions. The views presented in this paper are those of the authors and do not necessarily reflect those of the Banca d'ltalia.