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ITFIN: A stock-flow consistent model for the Italian economy

Author

Listed:
  • Barbieri Hermitte, Riccardo
  • Cagnazzo, Alberto
  • Favero, Carlo A.
  • Felici, Francesco
  • Macauda, Valeria
  • Nucci, Francesco
  • Tegami, Cristian

Abstract

Italy is characterized by a large sectoral imbalance (government debt) that has generated a pervasive country-risk premium and affected financial markets and the real economy. In this regard, ITFIN is a quarterly econometric model for the Italian economy that adopts a stock-flow consistent framework to describe sectoral and macroeconomic dynamics. Developed at Italy’s Department of the Treasury, this model focuses on determining the sovereign risk premium in the government debt market, its impact on the financial and banking system, and its transmission to the real economy. The financial position of each institutional sector is derived through a stock-flow consistent approach. Additionally, prices and returns for financial instruments are derived by modeling their supply and demand, along with a characterization of how financial stocks impinge on agents’ decisions and the patterns of real variables. Overall, our study illustrates this model and describes its properties by simulating the economy’s response under two counterfactual scenarios on monetary policy and different shocks to fiscal policy.

Suggested Citation

  • Barbieri Hermitte, Riccardo & Cagnazzo, Alberto & Favero, Carlo A. & Felici, Francesco & Macauda, Valeria & Nucci, Francesco & Tegami, Cristian, 2023. "ITFIN: A stock-flow consistent model for the Italian economy," Economic Modelling, Elsevier, vol. 119(C).
    • Handle: RePEc:eee:ecmode:v:119:y:2023:i:c:s0264999322003509
    DOI: 10.1016/j.econmod.2022.106113
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    More about this item

    Keywords

    Stock-flow consistent econometric modeling; ITFIN; Italian economy;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling

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