Growth and Cycles of the Italian Economy Since 1861: The New Evidence

Abstract

Based on a newly-available large set of historical national accounts, the paper revisits the main features of economic growth and cycles in Italy for the postUnification period 1861-2011. Alongside the structural changes in growth dynamics, the main sources of output and productivity growth are identified. As regards the analysis of the underlying cyclical component, a business cycle chronology is first established and then both the specific patterns of individual cycles and the co-movements of output with key macroeconomic variables are investigated. In the 150 years since its political Unification, Italy's economic growth was mainly propelled by consumption and investments, whereas on the supply side the industry and services sectors were by far the main contributors, also because of the positive effect of labour reallocation to nonfarm activities. Over the same period, Italy experienced approximately 20 business cycles of varying duration and amplitude. Output fluctuations were dominated by the short-term variability of agricultural production before World War II and by fluctuaEarlier drafts of this paper were presented at the study day in honour of Guido M. Rey "L'economia italiana: modelli, misurazione e nodi strutturali" (Università degli Studi Roma Tre, 5 March 2010) and the conference "Sviluppo economico e benessere" (Università Politecnica delle Marche, Ancona, 5 and 6 November 2010). We are grateful to all the participants for their useful comments. We also thank Alberto Baffigi for his precious help with the historical sources used, and Claire Giordano and Francesco Zollino for sharing their data with us upon request. Last, but not least, we thank two anonymous reviewers for their thorough review and highly valuable comments and suggestions, which significantly contributed to improving the quality of the paper. The usual caveats apply. tions of the industry sector thereafter. The cyclical behaviour exhibited by aggregate demand components conforms quite well to that evidenced in the standard international business cycle literature, although some exceptions arise in the pre-World War II years.

Business Cycles, Credit Cycles, and Bank Holdings of Sovereign Bonds: Historical Evidence for Italy 1861-2013

“…Although the combination of previous studies provides a large number of cycles (peaks in column 2), the most recent works over a long time span (column 3, 4, and 5) detect less cycle phases. In particular, we obtain the same numbers of peaks (17) as Jorda, Schularick and Taylor (2012), and roughly the same number as Clementi, Gallegati and Gallegati (2015), who found 18. In a few cases (3 out of 17 and 5 out of 18, respectively), our dating skips peaks pointed out in the other procedures.…”

“…Relevant political events and real and financial aspects interacted to shape this very long cyclical phase. Clementi, Gallegati and Gallegati (2015) find that two structural breaks occur, in 1974 and 2001, in GDP growth, which coincide with turning points of our dating (short cycles 14 and 16). The first break put an end to the strong recovery that began with the postwar capital reconstruction (short cycle 13), supported by substantial international aid, which had led to the so-called "economic miracle."…”

“…Their analysis is similar to ours, but their historical sources are different and not as homogeneous as the recent reconstructions of GDP and credit series used here and described in Section 2. Clementi, Gallegati and Gallegati (2015) put forward a business cycle analysis based on Baffigi's (2013) reconstruction, but they identify turning points in the deviation from trend series (growth cycles). Finally, in Appendix A.1, we evaluate our business cycle dating by comparing it with other historical analyses of the Italian business cycle using other approaches.…”

“…As a benchmark, he also drew up a list of business cycle peaks by combining the results of some previous studies on different periods. Clementi, Gallegati and Gallegati (2015) put forward a business cycle analysis based on Baffigi's (2013) reconstruction, but they identify turning points in the deviations from trend series (growth cycles). Finally, Jorda, Schularick and Taylor (2012) provide a classical dating of the Italian business cycle for the last 140 years using the Bry and Boschan (1971) algorithm, collecting data on GDP from different sources.…”

Employment volatility in lagging and advanced regions: The Italian case

“…As a second step, the final panel was constructed with 3‐year averages built to correspond to the national volatility structural breaks detected in Section 3 and, with a good fit, also to the peaks and troughs detected for the country by Clementi and Gallegati (). These 3‐year periods are reported in the Annex (Table )…”