IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/43199.html
   My bibliography  Save this paper

Debito, Mezzogiorno e sviluppo. A trivial exercise
[Sovereign Debt Sustainability, Mezzogiorno and Economic Growth. A Trivial Exercise]

Author

Listed:
  • Pica, Federico
  • Villani, Salvatore

Abstract

The analysis presented in this paper deals with two main issues: the one of debt sustainability, meant in the particular acceptation proposed in this article, and the one of the effects of debt decumulation for the various territorial communities, in particular for the weak areas of Italy (Mezzogiorno). The sustainability refers to the effects of the governmental financial situation on the growth rate of available resources for the purposes of consumption and investment. The proposed exercise aims at showing some possible outcomes of the economic and financial crisis that is taking place. Actually, the hypotheses proposed do not lead to a prevision, but to a prediction, that is a sort of prophecy deduced from a very limited set of data. Four hypotheses, concerning the constraints of various kinds regulating the variation over time of the debt amount, are proposed: firstly, the zero debt (or constant debt) hypothesis; secondly, the case of the invariance of GDP-debt ratio; thirdly, the hypothesis of a ceiling on public debt and, lastly, the case of a programmed path of public debt reduction, such as the fiscal compact. The above mentioned exercise consists in calculating, using the data collected in 2011, the rate of change in income of the areas considered (the country as a whole, the Southern Italy, excluding the islands) for the years going from 2013 to 2015. In the best case proposed (that is the zero debt hypothesis), the results prefigure a prognosis of stagnation in the economy of our country, which is more serious for the enterprises and the families of Mezzogiorno than in the rest of Italy. The other three cases, however, prefigure a situation of decline, which is more serious for the last proposed scenario, i.e. for the case of a programmed path of debt decumulation. In the Authors’ view, it takes to consider that, in Europe, the situation of the Italian Republic is similar to that one of a local government. Therefore, when a debt is assumed, a path of debt repayment in the coming years, which should be financed on the current budget, should be defined.

Suggested Citation

  • 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.
    • Handle: RePEc:pra:mprapa:43199
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/43199/1/MPRA_paper_43199.pdf
    File Function: original version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/43583/2/MPRA_paper_43583.pdf
    File Function: revised version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Alberto Bagnai, 2004. "Keynesian And Neoclassical Fiscal Sustainability Indicators, With Applications To Emu Member Countries," Public Economics 0411005, University Library of Munich, Germany.
    2. Leiner-Killinger, Nadine & Slavík, Michal & Holm-Hadulla, Fédéric, 2011. "The response of labour taxation to changes in government debt," Working Paper Series 1307, European Central Bank.
    3. Henning Bohn, 1998. "The Behavior of U. S. Public Debt and Deficits," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(3), pages 949-963.
    4. Pasinetti, Luigi L, 1998. "The Myth (or Folly) of the 3 Percent Deficit/GDP Maastricht 'Parameter.'," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 22(1), pages 103-116, January.
    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. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    7. 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.
    8. Weidenmier, Marc, 2010. "This Time is Different: Eight Centuries of Financial Folly. By Carmen Reinhart and Kenneth Rogoff. Princeton, NJ: Princeton University Press, 2009. $35.00," The Journal of Economic History, Cambridge University Press, vol. 70(3), pages 766-768, September.
    9. Luigi Spaventa, 1987. "The Growth of Public Debt: Sustainability, Fiscal Rules, and Monetary Rules," IMF Staff Papers, Palgrave Macmillan, vol. 34(2), pages 374-399, June.
    10. 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.
    11. Willem H. Buiter & K.M. Kletzer, 1994. "Ponzi Finance, Government Solvency and the Redundancy or Usefulness of Public Debt," Cowles Foundation Discussion Papers 1070, Cowles Foundation for Research in Economics, Yale University.
    12. Matteo Formenti, 2008. "Indicators and Tests of Sustainability: The Italian Case," Rivista di Politica Economica, SIPI Spa, vol. 98(6), pages 123-160, November-.
    13. Stephen Cecchetti & Madhusudan Mohanty & Fabrizio Zampolli, 2011. "The real effects of debt," BIS Working Papers 352, Bank for International Settlements.
    14. Giammarioli, Nicola & Nickel, Christiane & Rother, Philipp & Vidal, Jean-Pierre, 2007. "Assessing fiscal soundness: theory and practice," Occasional Paper Series 56, European Central Bank.
    15. 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.
    16. Smith, Gregor W & Zin, Stanley E, 1991. "Persistent Deficits and the Market Value of Government Debt," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 6(1), pages 31-44, Jan.-Marc.
    17. Nicola Giammarioli & Christiane Nickel & Philipp Rother & Jean-Pierre Vidal, 2007. "Assessing fiscal soundness - Theory and practice," Occasional Paper Series 56, European Central Bank.
    Full references (including those not matched with items on IDEAS)

    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. 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.
    2. Potrafke, Niklas & Reischmann, Markus, 2014. "Explosive Target balances of the German Bundesbank," Economic Modelling, Elsevier, vol. 42(C), pages 439-444.
    3. Jakob Korbinian Eberl, 2016. "The Collateral Framework of the Eurosystem and Its Fiscal Implications," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 69.
    4. Abderrahim Chibi & Sidi Mohamed Chekouri & Mohamed Benbouziane, 2019. "The dynamics of fiscal policy in Algeria: sustainability and structural change," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-27, December.
    5. 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.
    6. Abderrahim Chibi & Sidi Mohamed Chekouri & Mohamed Benbouziane, 2015. "Assessing Fiscal Sustainability in Algeria: a Nonlinear Approach," Working Papers 962, Economic Research Forum, revised Oct 2015.
    7. António Afonso, 2005. "Fiscal Sustainability: The Unpleasant European Case," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 61(1), pages 19-44, March.
    8. Oscar Bajo-Rubio & Carmen Diaz-Roldan & Vicente Esteve, 2008. "US deficit sustainability revisited: a multiple structural change approach," Applied Economics, Taylor & Francis Journals, vol. 40(12), pages 1609-1613.
    9. Burret Heiko T. & Feld Lars P. & Köhler Ekkehard A., 2013. "Sustainability of Public Debt in Germany – Historical Considerations and Time Series Evidence," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 233(3), pages 291-335, June.
    10. Georgios Chortareas & George Kapetanios & Merih Uctum, 2003. "A Nonlinear Approach to Public Finance Sustainability in Latin America," Working Papers 486, Queen Mary University of London, School of Economics and Finance.
    11. Kazakova, Maria & Nesterova, Kristina, 2015. "Long-Term Forecast of the Main Parameters of the Budgetary System of Russia," Published Papers 2309, Russian Presidential Academy of National Economy and Public Administration.
    12. 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.
    13. 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.
    14. 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.
    15. Regina Escario & Mar�a Dolores Gadea & Marcela Sabat�, 2009. "Government Solvency or just Pseudo-Sustainability? a Long-Run Multicointegration Approach for Spain," Documentos de Trabajo dt2009-07, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
    16. Anita Rath & Arpit Sachan, 2022. "Emerging Issues in Fiscal Sustainability in India: A Study of Central Government Finances, 1979–1980 to 2018–2019," South Asian Journal of Macroeconomics and Public Finance, , vol. 11(1), pages 39-68, June.
    17. Vito Polito & Mike Wickens, 2005. "Measuring Fiscal Sustainability," CDMA Conference Paper Series 0503, Centre for Dynamic Macroeconomic Analysis.
    18. Bodrova, Vera & Gvozdeva, Margarita & Kazakova, Maria, 2015. "Methods of Long-term Forecasting: Comparative Analysis and Foreign Experience of Applying," Published Papers 2310, Russian Presidential Academy of National Economy and Public Administration.
    19. Li, Tianyu & Du, Tongwei, 2021. "Vertical fiscal imbalance, transfer payments, and fiscal sustainability of local governments in China," International Review of Economics & Finance, Elsevier, vol. 74(C), pages 392-404.
    20. Cosimo Magazzino & Francesco Forte & Lorenzo Giolli, 2022. "On the Italian public accounts' sustainability: A wavelet approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 943-952, January.

    More about this item

    Keywords

    Sovereign Debt Sustainability; State and Local Budget and Expenditures; Interjurisdictional Differentials and Their Effects; State and Local Borrowing;
    All these keywords.

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing

    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:pra:mprapa:43199. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    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.