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Public Debt Management & Fiscal Sustainability in Italy

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  • Angela I. Uwakwe

    () (;Cardiff University; UK)

Abstract

This paper examines the government finances for Italy to determine if they satisfy the Inter-temporal Budget Constraint (IBC) especially since post-Maastricht. Italy met the convergence criteria in order to be accepted as an EMU country. Arghyrou and Luintel (2005) examine the finances of Italy up to the pre-Maastricht convergence period and find that the finances of Italy showed weak form sustainability demonstrating a Maastricht effect. Standard assumptions have been that Italy’s true position of un-sustainability would be inherent post-Maastricht. This paper examines this issue and finds: (i) that the debt to GDP series shows that the finances of Italy are un-sustainable; (ii) however the government revenue and expenditure show weak form sustainability. This paper also finds a downward trend of the government debt to GDP ratio and a convergence of the government revenue and expenditure in recent times. This implies that the finances of Italy satisfy the IBC and indeed continue to maintain the result of weak sustainability even post-Maastricht.

Suggested Citation

  • Angela I. Uwakwe, 2008. "Public Debt Management & Fiscal Sustainability in Italy," AIUB Bus Econ Working Paper Series AIUB-BUS-ECON-2008-20, American International University-Bangladesh (AIUB), Office of Research and Publications (ORP), revised Jun 2008.
  • Handle: RePEc:aiu:abewps:20
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    References listed on IDEAS

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    4. Corsetti, Giancarlo & Roubini, Nouriel, 1991. "Fiscal deficits, public debt, and government solvency: Evidence from OECD countries," Journal of the Japanese and International Economies, Elsevier, vol. 5(4), pages 354-380, December.
    5. Barry Eichengreen & Charles Wyplosz, 1998. "The Stability Pact: more than a minor nuisance?," Economic Policy, CEPR;CES;MSH, vol. 13(26), pages 65-113, April.
    6. Polito, Vito & Wickens, Michael R., 2005. "Measuring Fiscal Sustainability," CEPR Discussion Papers 5312, C.E.P.R. Discussion Papers.
    7. 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.
    8. Sebastian Edwards, 2003. "Debt relief and fiscal sustainability," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 139(1), pages 38-65, March.
    9. António Afonso, 2006. "Sustainability of fiscal policy in the EU-15," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 4(1), pages 34-38, 04.
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