We investigate the sustainability of Italy’s public finances from 1862 to 2012 adopting a non-linear perspective. Specifically, we employ the smooth transition regression approach to explore the scope for non-linear fiscal adjustments of primary surpluses in response to the accumulation of debt. The empirical results show the occurrence of a significantly positive reaction of primary surpluses to debt when the debt–GDP ratio exceeded the trigger value of 110 percent. The after-threshold positive response implies that the path of Italy’s fiscal policy is sufficiently consistent with the intertemporal budget constraint.

Non-linear budgetary policies: Evidence from 150 years of Italian public finance / Piergallini, Alessandro; Postigliola, Michele. - In: ECONOMICS LETTERS. - ISSN 0165-1765. - 121:3(2013), pp. 495-498. [10.1016/j.econlet.2013.09.030]

Non-linear budgetary policies: Evidence from 150 years of Italian public finance

PIERGALLINI, ALESSANDRO;POSTIGLIOLA, MICHELE
2013

Abstract

We investigate the sustainability of Italy’s public finances from 1862 to 2012 adopting a non-linear perspective. Specifically, we employ the smooth transition regression approach to explore the scope for non-linear fiscal adjustments of primary surpluses in response to the accumulation of debt. The empirical results show the occurrence of a significantly positive reaction of primary surpluses to debt when the debt–GDP ratio exceeded the trigger value of 110 percent. The after-threshold positive response implies that the path of Italy’s fiscal policy is sufficiently consistent with the intertemporal budget constraint.
2013
Fiscal policy; Fiscal sustainability; Non-linearity; Economics and Econometrics; Finance
01 Pubblicazione su rivista::01a Articolo in rivista
Non-linear budgetary policies: Evidence from 150 years of Italian public finance / Piergallini, Alessandro; Postigliola, Michele. - In: ECONOMICS LETTERS. - ISSN 0165-1765. - 121:3(2013), pp. 495-498. [10.1016/j.econlet.2013.09.030]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11573/870511
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