RT Journal Article
T1 Deficit sustainability and fiscal theory of price level: the case of Italy, 1861–2020
A1 Congregado Ramírez de Aguilera, Emilio
A1 Díaz Roldán, Carmen
A1 Esteve, Vicente
AB We test sustainability of the Italian government deficit over the period 1861–2020using the fiscal theory of the price level (FTPL). This approach takes into accountmonetary and fiscal policy interactions and assumes that fiscal policy may determinethe price level even if monetary authorities pursue an inflation-targeting strategy. Weconsider a cointegrated model with multiple structural changes to characterize thesustainability of public finances and the prevalence of monetary or fiscal dominanceduring subperiods. We also use recursive unit root tests for explosiveness to test fiscalsustainability and to detect episodes of potential explosive behaviour in Italianpublic debt. We find two structural changes for the public debt and one change in theprimary budget surplus, the alternation of monetary and fiscal dominant regimes,as well as evidence of bubbles related to three episodes of the Italian fiscal performance.Our results reveal the sensitiveness of the primary balance and the debtpaths to shocks hitting fiscal, macroeconomic, and financial variables.
PB Springer Science and Business Media LLC.
SN 0340-8744
SN 1573-6911 (electrónico)
YR 2023
FD 2023-05
LK https://hdl.handle.net/10272/22437
UL https://hdl.handle.net/10272/22437
LA eng
NO Congregado, E., Díaz-Roldán, C., & Esteve, V. (2023). Deficit sustainability and fiscal theory of price level: the case of Italy, 1861–2020. In Empirica (Vol. 50, Issue 3, pp. 755–782). Springer Science and Business Media LLC. https://doi.org/10.1007/s10663-023-09577-w
NO Open Access funding provided thanks to the CRUE-CSIC agreement with Springer Nature. The Project is funded by Ministerio de Ciencia e Innovación, Grant No. PID2020-114646RB-C42, Ministerio de Ciencia e Innovación Grant no. PID2020-115183RB-C22, and EPIT SEJ-487.
DS Repositorio Institucional de la Universidad de Huelva
RD 31 may 2026