Are Italy’s primary-surplus policies compatible with the sustainability of government debt? We address the question by examining historical budget data in post-unification Italy, over the 150 years from 1862 to 2012. Controlling for temporary output, temporary spending and world war-time periods in assessing whether primary surpluses significantly reacted to changes in debt, we find the following results: (i) the hypothesis of nonlinearity in the surplus-debt relationship significantly outperforms the hypothesis of linearity; (ii) there exists a threshold level in the debt-GDP ratio, approximately equal to 111%, above which Italian fiscal policy makers are concerned with corrective actions to avoid insolvency; (iii) the robustly positive reaction of primary surpluses to debt beyond the trigger point ensures fiscal sustainability.
Politiche di bilancio e debito pubblico nella storia italiana: un modello non lineare / Piergallini, Alessandro; Postigliola, Michele. - In: ANNALI DEL DIPARTIMENTO DI METODI E MODELLI PER L'ECONOMIA, IL TERRITORIO E LA FINANZA ..... - ISSN 2385-0825. - 1:1/2019(2019), pp. 63-72.
Politiche di bilancio e debito pubblico nella storia italiana: un modello non lineare
Michele Postigliola
2019
Abstract
Are Italy’s primary-surplus policies compatible with the sustainability of government debt? We address the question by examining historical budget data in post-unification Italy, over the 150 years from 1862 to 2012. Controlling for temporary output, temporary spending and world war-time periods in assessing whether primary surpluses significantly reacted to changes in debt, we find the following results: (i) the hypothesis of nonlinearity in the surplus-debt relationship significantly outperforms the hypothesis of linearity; (ii) there exists a threshold level in the debt-GDP ratio, approximately equal to 111%, above which Italian fiscal policy makers are concerned with corrective actions to avoid insolvency; (iii) the robustly positive reaction of primary surpluses to debt beyond the trigger point ensures fiscal sustainability.File | Dimensione | Formato | |
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