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The dynamic of the public debt. An analysis of the italian case, 1980-1996

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  • Angelo Marano

Abstract

The paper focuses on the determinants of the public debt/GDP ratio and analyses the conditions that guarantee the long run sustainability and the reduction of such ratio. Then discusses the dynamic of the Italian public debt in the last fifteen years and evaluate the size of the correction on the primary deficit needed. In spite of the primary deficits, the dynamic of the debt does not constitute a heavy problem until 1985, due to both the low starting level of the debt/GDP ratio and the low interest rates. During the period 1986-1991 the debt starts rising too much because the primary deficits are not anymore compensate by a positive differential between the rates of growth and interest. From 1992 a new rise in the real interest rates and a decrease in the rate of growth make the debt grow even faster. Its dynamic is brought back under control only thanks to the attainement of very big primary surpluses in 1995 and 1996. This, however, opens the door to the risk that this strategy may worsen the recession.

Suggested Citation

  • Angelo Marano, 1996. "The dynamic of the public debt. An analysis of the italian case, 1980-1996," LIUC Papers in Economics 33, Cattaneo University (LIUC).
    • Handle: RePEc:liu:liucec:33
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    1. Wilcox, David W, 1989. "The Sustainability of Government Deficits: Implications of the Present-Value Borrowing Constraint," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(3), pages 291-306, August.
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