IDEAS home Printed from https://ideas.repec.org/a/rpo/ripoec/v98y2008i6p123-160.html
   My bibliography  Save this article

Indicators and Tests of Sustainability: The Italian Case

Author

Listed:
  • Matteo Formenti

    (Università di Roma "Tor Vergata")

Abstract

The issue of sustainability of Italian fiscal policy in the period 1970-2006 is studied with two instruments: indicators and tests. The indicators Primary Gap, Tax Gap developed by Chouraqui et al. (1990) and S2 by the European Commission show a nonsustainable fiscal policy. Tests of sustainability following Trehan and Walsh (1988), Hakkio and Rush (1991) and Bohn (2008) show an opposite result accepting the sustainability path of fiscal variables. According to the strategy proposed by De Luzenberger and Marini (1993) a Chow-type test, that confirms a systematic change of fiscal policy in 1992-1993, permits to discern the two conflicting results in favour of the indicators’ response.

Suggested Citation

  • Matteo Formenti, 2008. "Indicators and Tests of Sustainability: The Italian Case," Rivista di Politica Economica, SIPI Spa, vol. 98(6), pages 123-160, November-.
    • Handle: RePEc:rpo:ripoec:v:98:y:2008:i:6:p:123-160
    as

    Download full text from publisher

    File URL: http://www.rivistapoliticaeconomica.it/2008/nov-dic/pdf/Formenti_en.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kremers, Jeroen J. M., 1988. "Long-run limits on the US Federal debt," Economics Letters, Elsevier, vol. 28(3), pages 259-262.
    2. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    3. Chalk, Nigel A., 2000. "The sustainability of bond-financed deficits: An overlapping generations approach," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 293-328, April.
    4. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    5. 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.
    6. Neil Rankin & Barbara Roffia, 2003. "Maximum Sustainable Government Debt in the Overlapping Generations Model," Manchester School, University of Manchester, vol. 71(3), pages 217-241, June.
    7. Aschauer, David Alan, 1985. "Fiscal Policy and Aggregate Demand," American Economic Review, American Economic Association, vol. 75(1), pages 117-127, March.
    8. Trehan, Bharat & Walsh, Carl E, 1991. "Testing Intertemporal Budget Constraints: Theory and Applications to U.S. Federal Budget and Current Account Deficits," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(2), pages 206-223, May.
    9. Trehan, Bharat & Walsh, Carl E., 1988. "Common trends, the government's budget constraint, and revenue smoothing," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 425-444.
    10. Buiter, W.H. & Corsetti, G. & Roubini, N., 1992. "Excessive Deficits: Sense and Nonsence in the Treaty of Maastricht," Papers 674, Yale - Economic Growth Center.
    11. Mr. Nigel A Chalk & Mr. Richard Hemming, 2000. "Assessing Fiscal Sustainability in Theory and Practice," IMF Working Papers 2000/081, International Monetary Fund.
    12. Jean-Claude Chouraqui & Robert P. Hagemann & Nicola Sartor, 1990. "Indicators of Fiscal Policy: A Re-Examination," OECD Economics Department Working Papers 78, OECD Publishing.
    13. Hamilton, James D & Flavin, Marjorie A, 1986. "On the Limitations of Government Borrowing: A Framework for EmpiricalTesting," American Economic Review, American Economic Association, vol. 76(4), pages 808-819, September.
    14. Hakkio, Craig S & Rush, Mark, 1991. "Is the Budget Deficit "Too Large?"," Economic Inquiry, Western Economic Association International, vol. 29(3), pages 429-445, July.
    15. Merih Uctum & Michael Wickens, 2000. "Debt and Deficit Ceilings, and Sustainability of Fiscal Policies: an Intertemporal Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(2), pages 197-222, May.
    16. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521001151, January.
    17. Bohn, Henning, 1995. "The Sustainability of Budget Deficits in a Stochastic Economy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 257-271, February.
    18. Quintos, Carmela E, 1995. "Sustainability of the Deficit Process with Structural Shifts," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(4), pages 409-417, October.
    19. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    20. Seater, John J. & Mariano, Roberto S., 1985. "New tests of the life cycle and tax discounting hypotheses," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 195-215, March.
    21. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
    22. Ihori, Toshihiro, 1978. "The Golden Rule and the Role of Government in a Life Cycle Growth Model," American Economic Review, American Economic Association, vol. 68(3), pages 389-396, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mariolis, Theodore & Papoulis, Κostas, 2010. "Δυναμική Του Δημοσίου Χρέους, Οικονομική Πολιτική Και Κοινωνική Συνοχή Στην Ελλάδα: Μία Σημείωση [Public debt dynamics, economic policy and social cohesion in Greece: a note]," MPRA Paper 28551, University Library of Munich, Germany.
    2. Mariolis, Theodore & Papoulis, Κostas, 2010. "Δυναμική Του Χρέους, ‘Δίδυμα Ελλείμματα’ Και Διεθνής Ανταγωνιστικότητα Της Ελληνικής Οικονομίας [Debt dynamics, ‘twin deficits’ and international competitiveness of the Greek economy]," MPRA Paper 23173, University Library of Munich, Germany.
    3. Pica, Federico & Villani, Salvatore, 2012. "Debito, Mezzogiorno e sviluppo. A trivial exercise [Sovereign Debt Sustainability, Mezzogiorno and Economic Growth. A Trivial Exercise]," MPRA Paper 43199, University Library of Munich, Germany, revised 28 Nov 2012.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mariusz Jarmuzek, 2005. "Are the EU new member states fiscally sustainable? An empirical analysis," UCL SSEES Economics and Business working paper series 51, UCL School of Slavonic and East European Studies (SSEES).
    2. António Afonso, 2000. "Fiscal policy sustainability: some unpleasant European evidence," Working Papers Department of Economics 2000/12, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    3. Evan Lau & Ahmad Zubaidi Baharumshah, 2005. "Assessing The Mean Reversion Behavior Of Fiscal Policy: The Case Of Asian Countries," Macroeconomics 0504002, University Library of Munich, Germany.
    4. Cunado, J. & Gil-Alana, L. A. & Perez de Gracia, F., 2004. "Is the US fiscal deficit sustainable?: A fractionally integrated approach," Journal of Economics and Business, Elsevier, vol. 56(6), pages 501-526.
    5. Giancarlo Marini & Alessandro Piergallini, 2008. "Indicators and Tests of Fiscal Sustainability: An Integrated Approach," CEIS Research Paper 111, Tor Vergata University, CEIS, revised 11 Jul 2008.
    6. António Afonso, 2005. "Fiscal Sustainability: The Unpleasant European Case," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 61(1), pages 19-44, March.
    7. Huseyin Kalyoncu, 2005. "Fiscal policy sustainability: test of intertemporal borrowing constraints," Applied Economics Letters, Taylor & Francis Journals, vol. 12(15), pages 957-962.
    8. Francisco de Castro & José M. González-Páramo & Pablo Hernández de Cos, 2001. "Evaluating the dynamics of fiscal policy in Spain: patterns of interdependence and consistency of public expenditure and revenues," Working Papers 0103, Banco de España.
    9. Paniagua, Jordi & Sapena, Juan & Tamarit, Cecilio, 2017. "Fiscal sustainability in EMU countries: A continued fiscal commitment?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 50(C), pages 85-97.
    10. Ananda Jayawickrama & Tilak Abeysinghe, 2006. "Sustainability of Fiscal Deficits : The US Experience 1929-2004," Governance Working Papers 21924, East Asian Bureau of Economic Research.
    11. Juan Carlos Cuestas & Luis A. Gil-Alana & Laura Sauci, 2020. "Public finances in the EU-27: Are they sustainable?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(1), pages 181-204, February.
    12. Polito, Vito & Wickens, Mike, 2012. "A model-based indicator of the fiscal stance," European Economic Review, Elsevier, vol. 56(3), pages 526-551.
    13. Michael Artis & Massimiliano Marcellino, "undated". "Fiscal Solvency and Fiscal Forecasting in Europe," Working Papers 142, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    14. Neaime, Simon, 2015. "Sustainability of budget deficits and public debts in selected European Union countries," The Journal of Economic Asymmetries, Elsevier, vol. 12(1), pages 1-21.
    15. Gabriella Deborah Legrenzi & Costas Milas, 2010. "Spend-and-Tax Adjustments and the Sustainability of the Government's Intertemporal Budget Constraint," CESifo Working Paper Series 2926, CESifo.
    16. Philip Arestis & Andrea Cipollini & Bassam Fattouh, 2004. "Threshold Effects in the U.S. Budget Deficit," Economic Inquiry, Western Economic Association International, vol. 42(2), pages 214-222, April.
    17. António Afonso & Christophe Rault, 2010. "What do we really know about fiscal sustainability in the EU? A panel data diagnostic," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(4), pages 731-755, January.
    18. Tilak Abeysinghe & Ananda Jayawickrama, 2013. "A segmented trend model to assess fiscal sustainability: The US experience 1929–2009," Empirical Economics, Springer, vol. 44(3), pages 1129-1141, June.
    19. Markus Reischmann, 2016. "Empirical Studies on Public Debt and Fiscal Transfers," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 63.
    20. Futagami, Koichi & Shibata, Akihisa, 1998. "Budget Deficits and Economic Growth," Public Finance = Finances publiques, , vol. 53(3-4), pages 331-354.
      • Futagami, Koichi & 二神, 孝一 & フタガミ, コウイチ & Shibata, Akihisa & 柴田, 章久 & シバタ, アキヒサ, 2003. "Budget Deficits and Economic Growth," Discussion Paper 133, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.

    More about this item

    Keywords

    fiscal sustainability; fiscal indicators and tests of sustainability; Chow test;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rpo:ripoec:v:98:y:2008:i:6:p:123-160. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sabrina Marino (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.