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, from 1861 to 2016. 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 105 percent, 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.
Evaluating the sustainability of Italian public finances / POSTIGLIOLA, MICHELE; PIERGALLINI, ALESSANDRO. - In: THE NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE. - ISSN 1062-9408. - (2020). [10.1016/j.najef.2020.101180]
|Titolo:||Evaluating the sustainability of Italian public finances|
POSTIGLIOLA, MICHELE (Corresponding author)
|Data di pubblicazione:||2020|
|Citazione:||Evaluating the sustainability of Italian public finances / POSTIGLIOLA, MICHELE; PIERGALLINI, ALESSANDRO. - In: THE NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE. - ISSN 1062-9408. - (2020). [10.1016/j.najef.2020.101180]|
|Appartiene alla tipologia:||01a Articolo in rivista|