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Non-Linear Budgetary Policies: Evidence from 150 Years of Italian Public Finance

Piergallini, Alessandro and Postigliola, Michele (2013): Non-Linear Budgetary Policies: Evidence from 150 Years of Italian Public Finance.

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Abstract

We investigate the sustainability of Italy's public finances from 1862 to 2012 adopting a non-linear perspective. Specifically, we employ the smooth transition regression approach to explore the scope for non-linear fiscal adjustments of primary surpluses in response to the accumulation of debt. The empirical results show the occurrence of a significantly positive reaction of primary surpluses to debt when the debt-GDP ratio exceeded the trigger value of 110 percent. The after-threshold positive response implies that the path of Italy's fiscal policy is sufficiently consistent with the intertemporal budget constraint.

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  • Non-Linear Budgetary Policies: Evidence from 150 Years of Italian Public Finance. (deposited 08. Aug 2013 04:14) [Currently Displayed]
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