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The Italian Treasury Econometric Model (ITEM)

Author

Listed:
  • Claudio Cicinelli
  • Andrea Cossio
  • Francesco Nucci
  • Ottavio Ricchi
  • Cristian Tegami

Abstract

In this paper, we provide a description of the Italian Treasury Econometric Model (ITEM). We illustrate its general structure and model properties, especially with regard to the economy's response to changes in policy and in other dimensions of the economic environment. The model has a quarterly frequency and includes 371 variables. Out of these, 124 are exogenous and 247 endogenous. The model structure features 36 behavioral equations and 211 identities. One of the key features of the model is the joint representation of the economic environment on both the demand and the supply side. Since it is designed for the needs of a Treasury Department, its public finance section is developed in great detail, both on the expenditure and revenue side. It also features a complete modeling of financial assets and liabilities of each institutional sector. After documenting the model structure and the estimation results, we turn to the outcomes of model simulation and ascertain the model properties. In ITEM the shocks that generate permanent effects on output are associated with: a) variation of variables that affect the tax wedge in the labor market and the user cost of capital; b) labor supply change; c) variation in the trend component of TFP (technical progress). By contrast, variables that exert their effects on the demand side have only temporary effects on output. We also perform in-sample dynamic simulation of the model. This allows us to derive simulated values of all the endogenous variables which can be compared with the corresponding actual values. This allows us to appraise, for each aggregate, whether the simulated values track the observed data.

Suggested Citation

  • Claudio Cicinelli & Andrea Cossio & Francesco Nucci & Ottavio Ricchi & Cristian Tegami, "undated". "The Italian Treasury Econometric Model (ITEM)," Working Papers wp2008-1, Department of the Treasury, Ministry of the Economy and of Finance.
  • Handle: RePEc:itt:wpaper:wp2008-1
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    References listed on IDEAS

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    10. Cicinelli, Claudio & Cossio, Andrea & Nucci, Francesco & Ricchi, Ottavio & Tegami, Cristian, 2010. "The Italian Treasury Econometric Model (ITEM)," Economic Modelling, Elsevier, vol. 27(1), pages 125-133, January.
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    Cited by:

    1. Cicinelli, Claudio & Cossio, Andrea & Nucci, Francesco & Ricchi, Ottavio & Tegami, Cristian, 2010. "The Italian Treasury Econometric Model (ITEM)," Economic Modelling, Elsevier, vol. 27(1), pages 125-133, January.
    2. Barbara Annicchiarico & Fabio Di Dio & Francesco Felici & Francesco Nucci, 2014. "Assessing Policy Reforms for Italy Using ITEM and QUEST III," Rivista di Politica Economica, SIPI Spa, issue 3, pages 211-244, July-Sept.
    3. Fabio DI DIO & Barbara ANNICCHIARICO & Francesco FELICI & Francesco NUCCI, "undated". "Macroeconomic Modelling and Policy Implications: an Assessment for Italy using ITEM and QUEST," EcoMod2010 259600045, EcoMod.
    4. Barbara Annicchiarico & Fabio Di Dio & Francesco Felici & Francesco Nucci, "undated". "Macroeconomic Modelling and the Effects of Policy Reforms: an Assessment for Italy using ITEM and," Working Papers 1, Department of the Treasury, Ministry of the Economy and of Finance.
    5. Stefania P. S. Rossi & Guido Pellegrini & Ornella Tarola, 2006. "Macroeconometric modelling for evaluationg the policy impact on growth in dualistic countries: the case of Southern Italian Regions," Vienna Economics Papers 0607, University of Vienna, Department of Economics.

    More about this item

    Keywords

    Macroeconometric models; Economic Policy;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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