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External constraint and economic growth in Italy: 1861-2000

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  • Barbara Pistoresi
  • Alberto Rinaldi

Abstract

This paper analyzes the relationship between external constraint and economic growth in Italy from 1861 to 2000. In particular, it investigates whether the persistent current account deficits in the 1861-1913 years constrained output growth. To this aim it studies the genesis of the current account fluctuations, that is whether these were generated by the dynamics of the GDP or by variations in capital inflows. Using integration and co-integration analysis and the Granger causality testing, it shows that in the long run Italy’s external position is sustainable: the Italian economy seems to have used the external deficits (surpluses) to smooth its aggregate consumption. Moreover in the shorter 1861-1913 sub-period, the persistent current account deficits, financed by foreign capital inflows, do not seem to have curbed economic growth.

Suggested Citation

  • Barbara Pistoresi & Alberto Rinaldi, 2013. "External constraint and economic growth in Italy: 1861-2000," Department of Economics (DEMB) 0011, University of Modena and Reggio Emilia, Department of Economics "Marco Biagi".
    • Handle: RePEc:mod:dembwp:0011
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    References listed on IDEAS

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    Cited by:

    1. Alberto Rinaldi & Barbara Pistoresi, 2014. "A note on Italy's current account sustainability: 1861-2010," Economics Bulletin, AccessEcon, vol. 34(2), pages 1197-1204.
    2. Barbara Pistoresi & Alberto Rinaldi, 2015. "Capital Inflows, Current Accounts and the Investment Cycle in Italy: 1861–1913," Research in Economic History, in: Research in Economic History, volume 31, pages 241-261, Emerald Group Publishing Limited.

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    More about this item

    Keywords

    Current account; economic growth; Italy; Granger causality;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
    • N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services

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