A Monetary History of Italy

Abstract

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.

Adjustment costs and nonlinear dynamics in the demand for money: Italy, 1861-1991

“…Following the influential perspective of Fratianni and Spinelli (1997), the 131 years of the Italian monetary history may be reasonably partitioned into seven subperiods: 1861-1913, 1914-1920, 1921-1937, 1938-1949, 1950-1969, 1970-1980 and 1981-1991. The first subperiod ends in 1913 with the end of the international gold standard, although Italy spent more time off than on the gold standard and, therefore, while this possibility is investigated statistically, there is not a particularly strong prior that the behaviour of real money may present a significant structural change in 1913.…”

“…The subperiods 1914-1920 and 1938-1949 The brief excursus provided in this section suggests that overall, the rich and often complicated Italian monetary history offers a quite peculiar challenge to researchers interested in modelling the demand for money, given the notorious diffi-culty to find stable money demand equations for relatively long periods stressed by a number of researchers: 'While hardly definitive, these results are certainly suggestive of recurring bouts of instability in money demand' (Goldfeld and Sichel, 1990); or 'I do not expect existing aggregate money demand functions to remain stable' (Cuthbertson, 1997(Cuthbertson, , p. 1197. Thus, in the empirical analysis the author explicitly examines the possibility of significant changes in the behaviour of the demand for money in Italy during each of the seven subperiods identified by Fratianni and Spinelli (1997) by using impulse dummy variables and by executing careful testing for parameter constancy for each of the estimated models reported below.…”

“…The Italian monetary history, briefly sketched below and elegantly surveyed in detail by Fratianni and Spinelli (1997), has seen many fundamental changes in exchange rate regimes, institutional structure and policy targets, which in addition to the continuous evolution of the financial system and various nominal and real shocks occurring during the sample period examined, represent serious potential threats to the development of an empirically stable money demand function over the whole sample. This task is addressed by starting with the standard co-integration and error correction techniques and following the conventional general-to-specific methodology, and then 'learning from the data' in order to adequately amend and improve the empirical model.…”

“…The first contribution of the present paper to this strand of literature is that an empirical model for the demand for narrow money in Italy is obtained using a high quality data set, largely obtained from the recently published monograph A Monetary History of Italy by Fratianni and Spinelli (1997), spanning from Italian unification in 1861 through to 1991.…”

Monetary–fiscal policy interaction and fiscal inflation: A tale of three countries

“…Although the divorce event marks a significant change in the interaction of these institutions, "one should be careful not to jump to the conclusion that 1981 represented a sharp breaking point between the previous regime of fiscal dominance and the new regime of central bank independence" (Fratianni and Spinelli, 1997). The view of the authors is corroborated by the fact that inflation rates in Italy remained among the highest in the EMS.…”