Fiscal Policy and Public Debt Dynamics in Italy, 1861-2009

Piergallini, Alessandro; Postigliola, Michele

doi:10.2139/ssrn.2118748

Cited by 10 publications

(9 citation statements)

References 21 publications

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“…Wyplosz (2006), Staehr (2008) and others apply the same methodology to European datasets and find some evidence of positive feedback from the debt stock to the primary balance but also conclude that the feedback is difficult to estimate precisely because the data series are short. Piergallini & Postigliola (2012) find that the primary balance in Italy has exhibited a positive reaction to the debt stock and conclude that politicians have taken corrective measures to ensure the sustainability of public finances in Italy. Estimating a fiscal reaction function for Brazil using monthly data, de Mello (2008) finds that the primary balance reacts positively and strongly to the lagged debt stock.…”

Section: Related Literaturementioning

confidence: 93%

The European debt crisis and fiscal reactions in Europe 2000–2014

Baldi

Stæhr

2015

Int Econ Econ Policy

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: After the outbreak of the global financial crisis, some governments in the EU experienced serious fiscal problems, while others were less affected. This paper seeks to shed light on the divergent fiscal performance in the EU countries before and after the outbreak of the crisis. Fiscal reaction functions of the primary balance are estimated for different groups of EU countries using quarterly data for the pre-crisis period 2001-2008 and for the crisis period 2009-2014. The pre-crisis estimations reveal some differences in persistence and cyclical reaction between different groups of countries, but generally little feedback from the debt stock to the primary balance. The fiscal reaction functions of the countries that eventually developed fiscal problems do not stand out. The estimations on data from the crisis period show largely unchanged persistence and counter-cyclicality but much more feedback from the debt stock, and this applies both to the crisis countries and those less affected. In spite of large deficits and accumulation of debt, the underlying fiscal reaction has become more prudent after the outbreak of the European debt crisis. Terms of use: Documents inJEL codes: E61, E62, H62, H63

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Section: Related Literaturementioning

confidence: 93%

The European debt crisis and fiscal reactions in Europe 2000–2014

Baldi

Stæhr

2015

Int Econ Econ Policy

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“…Wyplosz (2006), Staehr (2008) and others implement the same methodology on European datasets and find some evidence of a positive feedback from the debt stock to the primary balance, but the feedback is often imprecisely estimated due to short data series. Piergallini & Postigliola (2012) find that the primary balance in Italy has exhibited a positive reaction to the debt stock and argue that this suggests that politicians have taken corrective measures to ensure the sustainability of public finances in Italy. Estimating a fiscal reaction function for Brazil using monthly data, de Mello (2008) finds that the primary balance reacts positively and strongly to the lagged debt stock.…”

Section: Related Literaturementioning

confidence: 95%

The European Debt Crisis and Fiscal Reaction Functions in Europe 2000-2012

Baldi

Stæhr

2013

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: After the global financial crisis, some governments in the EU experienced serious debt financing problems, while others were less affected. This paper seeks to shed light on the divergent fiscal performance by assessing the fiscal conduct in the EU countries before and after the outbreak of the crisis. Fiscal reaction functions of the primary balance are estimated for different groups of EU countries using quarterly data for the pre-crisis period 2001-2008 and for the post-crisis period 2009-2012. The pre-crisis estimations reveal some differences in persistence and cyclical reaction between different groups of countries, but generally little feedback from the debt stock to the primary balance. The countries that eventually developed fiscal problems do not stand out. The post-crisis estimations show less counter-cyclicality and much more feedback from the debt stock, and these reactions are particularly pronounced for the countries with severe fiscal problems. Terms of use: Documents inJEL codes: E61, E62, H62, H63

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“…Casadio et al (2012) showed that a policy intervention aimed to stimulate the GDP growth over 1.8% allows to reach the target 100% debt-to-GDP ratio. The empirical evidence by Piergallini and Postigliola (2012) shows the occurrence of a significantly positive reaction of primary surpluses to debt when the debt/GDP ratio exceeded the trigger value of 110%. Accounting for structural breaks, Trachanas and Katrakilidis (2013) suggested that the sustainability of the fiscal deficits in Italy holds only in a weak sense.…”

Section: Empirical Literaturementioning

confidence: 99%

A wavelet analysis of Italian fiscal sustainability

Magazzino

Mutaşcu²

2019

Economic Structures

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The aim of this paper is to reassess the relationship between public primary deficit and debt (as GDP ratios), in order to test for Italian fiscal sustainability over the period 1862-2013. Italy has the second largest public debt/GDP ratio, and it represents the third economy in the European Union (EU), so that its public accounts stability is crucial for the whole area (Brady and Magazzino 2017a).The main problem for Italy, however, besides its high existing debt on which it is paying high interest in absolute terms, is that its growth is too slow. Since the euro area was founded, Italy's average annual real growth was 0.4%, just marginally above the lowest rate of 0.3% per annum for Greece and one percentage point below the mean value for the overall euro area. Italy's low growth rate, in turn, can be attributed to several structural causes. The country has recorded near zero productivity growth for years, and businesses are often very small, focus on the domestic market, and invest too little in R&D. Major inefficiencies exist in administration, e.g. in the justice system, and capital intensity is too low, also because investment declined by as much as 30% after the financial crisis. This was recently exacerbated by problems in the banking sector, including as a result of poor investment decisions in the past and short survival rates of governments over a long period, which have led to frequent election campaigns and delays in economic policy.Time domain analysis is the most widespread approach in the economic literature to study time series. Through such approach, the evolution of individual variables is modelled and multivariate relationships are assessed over time. Another strand of literature focuses on the frequency domain. Wavelets analysis reconciles both approaches, in the sense that both time and frequency domains are taken into account. With this approach, AbstractIn this paper, we analyse the relationship between public primary deficit and debt for Italian sustainability over the 1862-2013 years. Our empirical strategy uses the wavelet analysis. The empirical evidence suggests the presence of a substantial fiscal sustainability in the long run for Italy. This reversed much of the results of previous empirical literature, due to traditional time series approach and a shorter time horizon. which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.

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Fiscal Policy and Public Debt Dynamics in Italy, 1861-2009

Cited by 10 publications

References 21 publications

The European debt crisis and fiscal reactions in Europe 2000–2014

The European debt crisis and fiscal reactions in Europe 2000–2014

The European Debt Crisis and Fiscal Reaction Functions in Europe 2000-2012

A wavelet analysis of Italian fiscal sustainability

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