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Does Anticipated Fiscal Policy Matter? The Italian Evidence

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  • Ali F. Darrat

    (University of New Orleans)

Abstract

This article tests for Italy the validity of the Rational Expectations-Natural Rate (RENR) hypothesis that anticipated fiscal policy does not matter for real economic activity. An atheoretical statistical technique is employed for decomposing the Italian fiscal policy into anticipated and unanticipated components. The empirical results over the quarterly period 1960 to 1983 lend strong support to the RENR hypothesis: Only unanticipated fiscal policy exerts a significant expansionary impact upon real economic activity in Italy. These results. therefore, cast doubt on the appropriateness of activist fiscal policy for real economic stabilization in the case of Italy.

Suggested Citation

  • Ali F. Darrat, 1985. "Does Anticipated Fiscal Policy Matter? The Italian Evidence," Public Finance Review, , vol. 13(3), pages 339-352, July.
    • Handle: RePEc:sae:pubfin:v:13:y:1985:i:3:p:339-352
    DOI: 10.1177/109114218501300306
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    References listed on IDEAS

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