We examine the historical dynamics of government debt in post-unification Italy, from 1861 to 2009. Unit root tests for the debt-GDP ratio are unable to reject either the non-stationarity or the stationarity null hypothesis. Controlling debt dynamics for fiscal feedback policies of the Barro-Bohn style, however, the debt-GDP ratio is found to be mean-reverting. Mean-reversion in the debt-GDP ratio is due not only to a nominal growth dividend, but also to a positive response of primary surpluses to variations in outstanding debt. There is indeed significant evidence that, over the history of Italy, fiscal policy makers have reacted to the accumulation of debt, taking corrective measures to rule out potential long-term sustainability problems.

Fiscal Policy and Public Debt Dynamics in Italy, 1861-2009 / Piergallini, Alessandro; Postigliola, Michele. - In: RIVISTA ITALIANA DEGLI ECONOMISTI. - ISSN 1593-8662. - STAMPA. - XVII:3(2012), pp. 417-440. [10.1427/38532]

Fiscal Policy and Public Debt Dynamics in Italy, 1861-2009

PIERGALLINI, ALESSANDRO;POSTIGLIOLA, MICHELE
2012

Abstract

We examine the historical dynamics of government debt in post-unification Italy, from 1861 to 2009. Unit root tests for the debt-GDP ratio are unable to reject either the non-stationarity or the stationarity null hypothesis. Controlling debt dynamics for fiscal feedback policies of the Barro-Bohn style, however, the debt-GDP ratio is found to be mean-reverting. Mean-reversion in the debt-GDP ratio is due not only to a nominal growth dividend, but also to a positive response of primary surpluses to variations in outstanding debt. There is indeed significant evidence that, over the history of Italy, fiscal policy makers have reacted to the accumulation of debt, taking corrective measures to rule out potential long-term sustainability problems.
2012
01 Pubblicazione su rivista::01a Articolo in rivista
Fiscal Policy and Public Debt Dynamics in Italy, 1861-2009 / Piergallini, Alessandro; Postigliola, Michele. - In: RIVISTA ITALIANA DEGLI ECONOMISTI. - ISSN 1593-8662. - STAMPA. - XVII:3(2012), pp. 417-440. [10.1427/38532]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11573/870707
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