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The quest for a fiscal rule: Italy, 1861-1998

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  • Ricciuti, Roberto

Abstract

The Italian fiscal history is characterised by a number of fiscal consolidations. In this paper we characterise fiscal policy in terms of non-linear deterministic processes. We find that government spending and taxes can be described as being non-linear trend stationary processes instead of unit roots. A long run equilibrium relationship - a non-linear co-trend - does exist between the two series, fulfilling the intertemporal government budget constraint. We interpret this result as evidence of a long run fiscal rule that different policy makers have adopted, putting public finance in balance.

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  • Ricciuti, Roberto, 2007. "The quest for a fiscal rule: Italy, 1861-1998," POLIS Working Papers 86, Institute of Public Policy and Public Choice - POLIS.
    • Handle: RePEc:uca:ucapdv:86
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    Cited by:

    1. Magazzino, Cosimo & Brady, Gordon L. & Forte, Francesco, 2019. "A panel data analysis of the fiscal sustainability of G-7 countries," The Journal of Economic Asymmetries, Elsevier, vol. 20(C).
    2. Thanh Dat Nguyen & Sandy Suardi & Chew Lian Chua, 2017. "The Behavior Of U.S. Public Debt And Deficits During The Global Financial Crisis," Contemporary Economic Policy, Western Economic Association International, vol. 35(1), pages 201-215, January.
    3. Piergallini, Alessandro & Postigliola, Michele, 2013. "Non-linear budgetary policies: Evidence from 150 years of Italian public finance," Economics Letters, Elsevier, vol. 121(3), pages 495-498.
    4. Cosimo Magazzino & Francesco Forte & Lorenzo Giolli, 2022. "On the Italian public accounts' sustainability: A wavelet approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 943-952, January.
    5. Cushman, David O. & Michael, Nils, 2011. "Nonlinear trends in real exchange rates: A panel unit root test approach," Journal of International Money and Finance, Elsevier, vol. 30(8), pages 1619-1637.
    6. Nicola Pontarollo & Roberto Ricciuti, 2020. "Railways and manufacturing productivity in Italy after unification," Journal of Regional Science, Wiley Blackwell, vol. 60(4), pages 775-800, September.
    7. Giandomenico Piluso & Roberto Ricciuti, 2008. "Fiscal Policy and the Banking System in Italy. Have Taxes, Public Spending and Banks been Procyclical in the Long-Run?," CESifo Working Paper Series 2442, CESifo.

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    More about this item

    Keywords

    taxes; government expenditure; intertemporal government budget constraint; non-linear trend stationarity; non-linear co-trending;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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