Piergallini, Alessandro and Postigliola, Michele (2011): Fiscal Policy and Public Debt Dynamics in Italy.
Download (215kB) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||Fiscal Policy and Public Debt Dynamics in Italy|
|Keywords:||Fiscal Policy; Public Debt; Fiscal Sustainability.|
|Subjects:||E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy
H - Public Economics > H6 - National Budget, Deficit, and Debt
C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables
|Depositing User:||Alessandro Piergallini|
|Date Deposited:||19. Jan 2011 16:25|
|Last Modified:||24. Mar 2015 20:53|
Abbas, S. M. A., Belhocine, N., ElGanainy, A. A., and Horton, M. A. (2010), “A Historical Public Debt Database”, IMF Working Paper No. 10/245.
Barro, R. J. (1979) “On the Determination of Public Debt”, Journal of Political Economy 87, 940-971.
Barro, R. J. (1986), “U.S. Deficits since World War I”, Scandinavian Journal of Economics 88, 195-222.
Bohn, H. (1998), “The Behavior of U.S. Public Debt and Deficits”, Quarterly Journal of Economics 113, 949-963.
Bohn, H. (2007), “Are Stationarity and Cointegration Restrictions Really Necessary for the Intertemporal Budget Constraint?”, Journal of Monetary Economics 54, 1837- 1847.
Bohn, H. (2008), “The Sustainability of Fiscal Policy in the United States”, in Neck, R. and Sturm, J., Sustainability of Public Debt, MIT Press, 15-49.
Chung, H., Davig, T., and Leeper, E.M. (2007), “Monetary and Fiscal Policy Switching”, Journal of Money, Credit and Banking 39, 809-842.
Clemente, J., Montañés, A. and Reyes, M., (1998). “Testing for a Unit Root in Variables with a Double Change in the Mean”, Economics Letters, 59, 175-182.
Fratianni, M., and Spinelli, F. (2001), Storia Monetaria d’Italia, ETAS, Milano.
Galli, E., and Padovano, F. (2008), “Sustainability and Determinants of Italian Public Deficits before and after Maastricht”, in Neck, R. and Sturm, J., Sustainability of Public Debt, MIT Press, 51-83.
Hamilton, J. (1994), Time Series Analysis, Princeton University Press.
International Monetary Fund (2010), World Economic Outlook, October.
Jones, M. T., and Obstfeld, M. (2001): “Saving, Investments and Gold; A Reassessment of Historical Current Account Data” in Calvo, G. A., Dornbusch, R., and Obstfeld, M., Money, Capital Mobility and Trade: Essays in Honor of R. Mundell, MIT Press.
Kwiatkowski, D., Phillips, P., Schmidt, P., and Shin, Y. (1992), “Testing the Null Hypothesis of Stationarity against the Alternative of a Unit Root”, Journal of Econometrics 54, 159-178.
LaSalle, J. P. (1986), “The Stability and Control of Discrete Processes”, in Applied Mathematical Science 62, Springer, New York.
Mendoza, E. G., and Ostry, J. D. (2008), “International Evidence on Fiscal Solvency: Is Fiscal Policy ‘Responsible’?”, Journal of Monetary Economics 55, 1081-1093.
Newey, W., and West, K. (1987), “A Simple Positive Semi-Definite Heteroskedasticity and Autocorrelation Consistent Covariance Matrix”, Econometrica 55, 703-708.
Repaci F. A. (1962), La Finanza Pubblica Italiana nel Secolo 1861-1960, Zanichelli, Bologna.
Rossi, N., Sorgato, A., and Toniolo, G. (1993) “I Conti Economici Italiani: una Ricostruzione Statistica, 1890-1990”, Rivista di Storia Economica 10, 1-47.