The quest for a fiscal rule: Italy, 1861-1998

P.O.L.I.S. department's Working Papers from Department of Public Policy and Public Choice - POLIS

Abstract: The Italian fiscal history is characterised by a number of fiscal consolidations. In this paper we characterise fiscal policy in terms of non-linear deterministic processes. We find that government spending and taxes can be described as being non-linear trend stationary processes instead of unit roots. A long run equilibrium relationship - a non-linear co-trend - does exist between the two series, fulfilling the intertemporal government budget constraint. We interpret this result as evidence of a long run fiscal rule that different policy makers have adopted, putting public finance in balance.

Keywords: taxes; government expenditure; intertemporal government budget constraint; non-linear trend stationarity; non-linear co-trending (search for similar items in EconPapers)
JEL-codes: E62 H62 N10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-pbe
Date: Written 2007-09

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Related works:
Journal Article: The quest for a fiscal rule: Italy, 1861–1998 (2008)
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