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The impact of shocks and policies on debt-to-GDP ratio dynamics: a multisectoral approach

Author

Listed:
  • Stefano Deriu

    (University of Macerata)

  • Marcello Signorelli

    (University of Perugia)

  • Claudio Socci

    (University of Macerata)

  • Rosita Pretaroli

    (University of Macerata)

  • Francesca Severini

    (University of Macerata)

  • Ludovica Almonti

    (University of Macerata)

Abstract

The dynamics of debt-to-GDP ratio is one of the major elements scrutinized by policymakers, especially in the present context characterized by the sequence of global financial crises, the Covid-19 pandemic and, more recently, armed conflicts in Europe. Such events call for greater public support to prevent economic collapse, raising questions about the sustainability of the sovereign debt. In this paper, we investigate the impact of selected shocks and policies on the debt-to-GDP ratio dynamics by adopting a disaggregated multi-sectoral Computable General Equilibrium model calibrated on the Social Accounting Matrix for Italy. Particularly, according to several scenarios, a rise in energy prices and a drop in exports are considered jointly with budget policies, regarding the expansion of public investment and alternative monetary policies, aimed at sustaining the economies from different perspectives. The impact of these scenarios is discussed in terms of changes in the main macroeconomic variables and dynamics of the debt-to-GDP ratio.

Suggested Citation

  • Stefano Deriu & Marcello Signorelli & Claudio Socci & Rosita Pretaroli & Francesca Severini & Ludovica Almonti, 2024. "The impact of shocks and policies on debt-to-GDP ratio dynamics: a multisectoral approach," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 41(2), pages 417-438, July.
    • Handle: RePEc:spr:epolit:v:41:y:2024:i:2:d:10.1007_s40888-024-00330-5
    DOI: 10.1007/s40888-024-00330-5
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    Keywords

    Energy shocks; Fiscal and monetary policies; Public debt sustainability; CGE model; SAM; Italy;
    All these keywords.

    JEL classification:

    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E16 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Social Accounting Matrix

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