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Balance-sheet restructuring in Italy: an empirical analysis based on monetary circuit theory

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  • Marcello Spanò

    (N/A)

Abstract

Based on 25 years (1995–2019) of fully integrated sectoral data, this study builds on monetary circuit theory to examine the Italian experience of growing private debt followed by a long recession with balance-sheet restructuring. It is argued that this process cannot be identified as a typical balance-sheet recession. After the global financial crisis of 2007–2008, Italian firms increased financial sources from economic activities by retaining earnings, lowering wages, and disinvesting. Their deleverage, however, rested largely on the overall financial wealth reallocation that occurred after 2012, which was induced by monetary and fiscal policy, creating the conditions for households to increase net saving and to channel cumulated wealth from government securities and money balances towards equities.

Suggested Citation

  • Marcello Spanò, 2024. "Balance-sheet restructuring in Italy: an empirical analysis based on monetary circuit theory," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 21(3), pages 440-460, October.
    • Handle: RePEc:elg:ejeepi:v:21:y:2024:i:3:p440-460
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    More about this item

    Keywords

    Sources of finance; Debt; Sectoral analysis; Money reflux; Economic policy;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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