Non-Linear Budgetary Policies: Evidence from 150 Years of Italian Public Finance

Alessandro Piergallini and Michele Postigliola ()

MPRA Paper from University Library of Munich, Germany

Abstract: We investigate the sustainability of Italy's public finances from 1862 to 2012 adopting a non-linear perspective. Specifically, we employ the smooth transition regression approach to explore the scope for non-linear fiscal adjustments of primary surpluses in response to the accumulation of debt. The empirical results show the occurrence of a significantly positive reaction of primary surpluses to debt when the debt-GDP ratio exceeded the trigger value of 110 percent. The after-threshold positive response implies that the path of Italy's fiscal policy is sufficiently consistent with the intertemporal budget constraint.

Keywords: Fiscal Policy; Fiscal Sustainability; Non-Linearity. (search for similar items in EconPapers)
JEL-codes: C20 E62 H60 (search for similar items in EconPapers)
Date: 2013-08-07
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Citations: View citations in EconPapers (12)

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Journal Article: Non-linear budgetary policies: Evidence from 150 years of Italian public finance (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:48922

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