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.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
