This volume deals with the monetary history of Italy from its independence in 1861 to 1992. It provides the first complete analysis of a country which has experienced diverse and often dramatic monetary conditions. The authors interpret Italian monetary history through the looking glass of a model which, while monetarist in flavour, is open to other interpretations. A key theme is that public finance is at the root of the (relatively) high Italian inflation rates. The authors argue that there is a strong relationship between the government budget deficit and monetary policy, and that the monetary authorities are too dependent on government. The book contributes in a novel way not only to the monetary debate, but also to fiscal and institutional questions. It combines economic theory, statistical data and history in an accessible way which should prove useful to both economic historians and monetary economists.

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The term financial revolution has been abused in the literature. Revolution connotes a sharp and unique break from the past that should stand up to careful historical scrutiny, but in fact it does not. Evolution describes financial history better than revolutions. We compare the classic 'financial revolutions' with the financial innovations of Genoa, Venice and Florence in the Quattrocento and Cinquecento and the upshot is that these Italian city-states -the two maritime cities more than Florence -had developed many of the features that were to be found later on in the Netherlands, England and the United States. The importance of the early financial innovators has been eclipsed by the fact that these city-states did not survive politically. Instead, the innovations were absorbed in the long chain of financial evolution and, in the process, lost the identity of their creators.

and FRANC0 SPINELLIt Unioersita' degli Studi di Trento I INTRODUCTIONThe impact of financial innovation and deregulation on the ability of the authorities of the industrialized countries to pursue effectively a strategy of monetary targeting has varied from country to country. In some cases, the authorities seem to have had no major problems in achieving their preannounced monetary targets; in other cases, the targets were not met, the monetary aggregates were redefined and the strategy of monetary targeting was discontinued or substantially modified. In the literature on the relationships among financial innovation and deregulation, money demand and monetary targeting, there have been a number of explanations of why problems with monetary targeting arise. However, these discussions have focused on a limited set of topics and have not considered a number of important factors. There has been a tendency to overlook the fact that, at least in their early stages, financial innovations are largely endogenous to past and present monetary policies and that both the kind and the tempo of financial deregulation are under the control of the authorities. Moreover, most of the literature has focused only on what are regarded as the major problem cases like the United States, Canada, and the United Kingdom. In particular, there are no studies that combine, in a compact way, a description of the forces starting and driving the processes of financial innovation and deregulation in countries other than those indicated above with an empirical analysis of the stability of their money demand. This paper fiffs a portion of this gap by considering the experiences of France and Italy.Our analysis suggests that, for both France and Italy, the most important factor that initially drove the processes of financial innovation and deregulation appears to have been the need to finance large budget deficits.Manuscript received 8.5.86; hnal version received 11.1.88. t W e thank

In this paper we estimate a stable demand for money relationship for Italy using a long series I$ historical data. We extend previously available data sets to obtain a sample for the years 1861 to 1990 and use cointegration analysis and two-stage estimation procedures to obtain a dynamic modelfbr M2 demand. By employing a small number I$ explanatory variables and a nonlinear error-correction model we find a stable demand for money relationship. Our model incorporates sign@cant i@ation and interest rate efiects, in contrast to previous studies I$ this type.