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The automatic reaction of the Italian government budget to fundamentals: an econometric analysis

  • Sergio Ginebri
  • Bernardo Maggi
  • Manuel Turco
Registered author(s):

    The paper offers a new estimate of the sensitivity of Italy's primary budget balance to macroeconomic variables. The analysis has distinguishing features: detailed itemization of public finance aggregates; close attention to the statistical properties of the time series; and joint estimation of elasticities with respect to both real GDP and inflation. First, the economic variables driving the automatic component were chosen. Second, when possible, a macroeconomic base was associated with each public finance item. Third, each tax base was regressed on the driving economic variables. Fourth, each budget item that was supposed to include an automatic component was regressed either on its own base or directly on the economic variables affecting the automatic components. The effects on public budget are simulated to investigate the consequences of a change in nominal and real GDP.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/0003684042000291326
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    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 37 (2005)
    Issue (Month): 1 ()
    Pages: 67-81

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    Handle: RePEc:taf:applec:v:37:y:2005:i:1:p:67-81
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    1. Braconier, Henrik & Holden, Steinar, 1999. "The Public Budget Balance - Fiscal Indicators and Cyclical Sensitivity in the Nordic Countries," Working Paper 67, National Institute of Economic Research.
    2. Claude Giorno & Pete Richardson & Deborah Roseveare & Paul van den Noord, 1995. "Estimating Potential Output, Output Gaps and Structural Budget Balances," OECD Economics Department Working Papers 152, OECD Publishing.
    3. Joanna Paisley & Chris Salmon, 1995. "How Cyclical is the PSBR?," Bank of England working papers 34, Bank of England.
    4. Jordi GalÌ & Roberto Perotti, 2003. "Fiscal policy and monetary integration in Europe," Economic Policy, CEPR;CES;MSH, vol. 18(37), pages 533-572, October.
    5. Jean-Claude Chouraqui & Robert P. Hagemann & Nicola Sartor, 1990. "Indicators of Fiscal Policy: A Re-Examination," OECD Economics Department Working Papers 78, OECD Publishing.
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