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Cyclically adjusted local government balances

Author

Listed:
  • Eugenia Panicara

    () (Banca d'Italia)

  • Massimiliano Rigon

    () (Banca d'Italia)

  • Gian Maria Tomat

    () (Banca d'Italia)

Abstract

The paper provides an analysis of cyclically-adjusted budget balances of local governments in Italy for the period 2002-07. We find that local government balances appear to be relatively sensitive to the business cycle. In particular, a shock of 1 per cent in GDP changes their resources by approximately 0.6 billion. Within the sample period, both central and local policies concerning local government budgets had a sizeable impact on local government balances in cyclically-adjusted terms.

Suggested Citation

  • Eugenia Panicara & Massimiliano Rigon & Gian Maria Tomat, 2012. "Cyclically adjusted local government balances," Questioni di Economia e Finanza (Occasional Papers) 142, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_142_12
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    File URL: http://www.bancaditalia.it/pubblicazioni/qef/2012-0142/QEF_142.pdf
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    References listed on IDEAS

    as
    1. Francesca D'Auria & Cécile Denis & Karel Havik & Kieran Mc Morrow & Christophe Planas & Rafal Raciborski & Werner Roger & Alessandro Rossi, 2010. "The production function methodology for calculating potential growth rates and output gaps," European Economy - Economic Papers 2008 - 2015 420, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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    3. Alberto Alesina & Ignazio Angeloni & Ludger Schuknecht, 2005. "What does the European Union do?," Public Choice, Springer, vol. 123(3), pages 275-319, June.
    4. Canova, Fabio, 1998. "Detrending and business cycle facts," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 475-512, May.
    5. King, Robert G. & Rebelo, Sergio T., 1993. "Low frequency filtering and real business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 17(1-2), pages 207-231.
    6. Bouthevillain, C. & Van Den Dool, G. & Langenus, G. & Mohr, M. & Momigliano, S. & Tujula, M. & De Cos, P.H. & Cour-Thimann, Philippine, 2001. "Cyclically Adjusted Budget Balances: an Alternative Approach," Papers 77, Quebec a Montreal - Recherche en gestion.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    local public finance; budget sensitivity; business cycle; tax elasticity;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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