IDEAS home Printed from https://ideas.repec.org/a/elg/rokejn/v3y2015i4p491-516.html
   My bibliography  Save this article

Causes of the decline of economic growth in Italy with special reference to the post-euro period: a balance-of-payments approach

Author

Listed:
  • Elias Soukiazis

    (University of Coimbra and GEMF, Portugal)

  • Pedro André Cerqueira

    (University of Coimbra and GEMF, Portugal)

  • Micaela Antunes

    (University of Coimbra and GEMF, Portugal)

Abstract

The aim of this paper is to investigate the causes of the poor growth performance in Italy and the responsibility of the euro for this crisis. The theoretical approach applied is based on the balance-of-payments constraint hypothesis (known as Thirlwall's law), adapted to include internal and external imbalances. Our empirical analysis shows that both the extended model and the original Thirlwall's law over-predict the actual growth in Italy, suggesting that there are supply constraints that impede the economy from growing faster. Another conclusion is that part of the decline in economic growth is explained by the loss of competiveness during the euro period. A scenario analysis shows that a budget deficit and public debt discipline aiming at achieving the goals of the Stability Pact are not significant stimuli for faster growth. On the other hand, reducing the import dependence of the components of demand, or reducing the import and increasing the export shares in the economy, are the most effective policies for fostering growth in Italy.

Suggested Citation

  • Elias Soukiazis & Pedro André Cerqueira & Micaela Antunes, 2015. "Causes of the decline of economic growth in Italy with special reference to the post-euro period: a balance-of-payments approach," Review of Keynesian Economics, Edward Elgar Publishing, vol. 3(4), pages 491—516-4, October.
  • Handle: RePEc:elg:rokejn:v:3:y:2015:i:4:p491-516
    as

    Download full text from publisher

    File URL: http://www.elgaronline.com/abstract/journals/roke/3-4/roke.2015.04.04.xml
    Download Restriction: Restricted access
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Salvatore D'Acunto & Sergio Destefanis & Marco Musella, 2004. "Exports, Supply Constraints and Growth: An Investigation using Regional Data," International Review of Applied Economics, Taylor & Francis Journals, vol. 18(2), pages 167-189.
    2. Taylor, Lance, 1994. "Gap models," Journal of Development Economics, Elsevier, vol. 45(1), pages 17-34, October.
    3. ., 1994. "Rational Actor Models," Chapters, in: Geoffrey M. Hodgson & Warren J. Samuels & Marc R. Tool (ed.), The Elgar Companion to Institutional and Evolutionary Economics, volume 0, chapter 127, Edward Elgar Publishing.
    4. John Y. Campbell & Andrew W. Lo & A. Craig MacKinlay, 1994. "Models of the term structure of interest rates," Working Papers 94-10, Federal Reserve Bank of Philadelphia.
    5. Tom A. B. Snijders & Roel J. Bosker, 1994. "Modeled Variance in Two-Level Models," Sociological Methods & Research, , vol. 22(3), pages 342-363, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tadesse, Tasew, 2011. "Foreign aid and economic growth in Ethiopia," MPRA Paper 33953, University Library of Munich, Germany, revised 20 Sep 2011.
    2. Sharon Kozicki & Peter A. Tinsley, "undated". "Moving Endpoints in Macrofinance," Computing in Economics and Finance 1996 _058, Society for Computational Economics.
    3. F. Pastore, 2015. "The Mezzogiorno and Crisis after Market and State Failures. A Review of Economic Literature," Rivista economica del Mezzogiorno, Società editrice il Mulino, issue 3-4, pages 525-582.
    4. Thanoon, Marwan Abdul-Malik & Baharumshah, Ahmad Zubaidi, 2003. "The road to recovery in Malaysia: a three-gap analysis," Journal of Policy Modeling, Elsevier, vol. 25(8), pages 857-861, November.
    5. Constantino J. Gode, 2001. "Sovereign Debt and Uncertainty in the Mozambican Economy," WIDER Working Paper Series DP2001-130, World Institute for Development Economic Research (UNU-WIDER).
    6. de Souza, Joao Paulo A., 2015. "Evidence of growth complementarity between agriculture and industry in developing countries," Structural Change and Economic Dynamics, Elsevier, vol. 34(C), pages 1-18.
    7. Kemp-Benedict, Eric, 2014. "Shifting to a Green Economy: Lock-in, Path Dependence, and Policy Options," MPRA Paper 60175, University Library of Munich, Germany.
    8. Jeronim Capaldo, 2014. "Trade Hallucination: Risks of Trade Facilitation and Suggestions for Implementation," GDAE Working Papers 14-02, GDAE, Tufts University.
    9. Michalis Nikiforos & Laura Carvalho & Christian Schoder, 2015. "“Twin deficits” in Greece: in search of causality," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 38(2), pages 302-330, October.
    10. Vogel, Dominik, 2018. "Vogel (2018): Matching survey responses with anonymity in environments with privacy concerns: A practical guide," SocArXiv nwjd7, Center for Open Science.
    11. Arslan Razmi, 2013. "Correctly Analyzing the Balance of Payments Constraint on Growth," UMASS Amherst Economics Working Papers 2013-12, University of Massachusetts Amherst, Department of Economics.
    12. John Y. Campbell & John Cochrane, 1999. "Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 205-251, April.
    13. Yap, Josef T., 1997. "Macroeconomic Impact of a Tariff Reduction: A Three-Gap Analysis with Model Simulations," Philippine Journal of Development JPD 1997 Vol. XXIV No.1-b, Philippine Institute for Development Studies.
    14. Liu, Kai & Wang, Jiangbo & Yamamoto, Toshiyuki & Morikawa, Takayuki, 2016. "Modelling the multilevel structure and mixed effects of the factors influencing the energy consumption of electric vehicles," Applied Energy, Elsevier, vol. 183(C), pages 1351-1360.
    15. Ghulam, Yaseen & Derber, Julian, 2018. "Determinants of sovereign defaults," The Quarterly Review of Economics and Finance, Elsevier, vol. 69(C), pages 43-55.
    16. Frederico Gonzaga Jayme Junior, 2001. "Balance-of-payments constrained economic growth in Brazil," Textos para Discussão Cedeplar-UFMG td155, Cedeplar, Universidade Federal de Minas Gerais.
    17. Yenteshwar Ram, Biman Prasad, Ron Duncan, 2005. "Explaining the Supply-side Constraints to Export-led Growth in Selected Pacific Island Countries," Working Papers 205, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
    18. Karsten Staehr, 2017. "Capital flows and growth dynamics in Central and Eastern Europe," Bank of Estonia Working Papers wp2016-10, Bank of Estonia, revised 06 Feb 2017.
    19. Gundersen, Sara & McKay, Michael, 2019. "Reward or punishment? An examination of the relationship between teacher and parent behavior and test scores in the Gambia," International Journal of Educational Development, Elsevier, vol. 68(C), pages 20-34.
    20. Sergio Destefanis & Vania Sena, 2009. "Public capital, productivity and trade balances: some evidence for the Italian regions," Empirical Economics, Springer, vol. 37(3), pages 533-554, December.

    More about this item

    Keywords

    internal and external imbalances; import elasticities of the components of demand; equilibrium growth rates; 3SLS system regressions;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:elg:rokejn:v:3:y:2015:i:4:p491-516. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Phillip Thompson). General contact details of provider: http://www.elgaronline.com/roke .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.