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

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  • Roberto Ricciuti

    () (Dipartimento di Studi sullo Stato, University of Florence, Via delle Pandette, 21-50127 Firenze, Italy & CESifo, Munich, Germany & Robert Schuman Centre for Advanced Studies, EUI, San Domenico di Fiesole, Italy)

Abstract

The Italian fiscal history is characterised by a number of fiscal consolidations. In this study, 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.

Suggested Citation

  • Roberto Ricciuti, 2008. "The quest for a fiscal rule: Italy, 1861–1998," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 2(3), pages 259-274, October.
  • Handle: RePEc:afc:cliome:v:2:y:2008:i:3:p:259-274
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    References listed on IDEAS

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    1. Robert J. Barro, 1986. "The Behavior of United States Deficits," NBER Chapters,in: The American Business Cycle: Continuity and Change, pages 361-394 National Bureau of Economic Research, Inc.
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    7. McCallum, Bennett T, 1984. "Are Bond-Financed Deficits Inflationary? A Ricardian Analysis," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 123-135, February.
    8. Henning Bohn, 1998. "The Behavior of U. S. Public Debt and Deficits," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 949-963.
    9. Quintos, Carmela E, 1995. "Sustainability of the Deficit Process with Structural Shifts," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(4), pages 409-417, October.
    10. Cushman David O., 2002. "Nonlinear Trends and Co-trending in Canadian Money Demand," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 6(1), pages 1-29, April.
    11. Michael P. Clements & David F. Hendry, 2001. "Forecasting Non-Stationary Economic Time Series," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262531895, January.
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    Cited by:

    1. 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.
    2. 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.
    3. 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 Group Munich.
    4. repec:bla:coecpo:v:35:y:2017:i:1:p:201-215 is not listed on IDEAS

    More about this item

    Keywords

    Intertemporal government budget constraint; Non-linear trend stationarity; Non-linear co-trending;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • 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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