The impact of shocks and policies on debt-to-GDP ratio dynamics: a multisectoral approach

Stefano Deriu (), Marcello Signorelli, Claudio Socci (), Rosita Pretaroli (), Francesca Severini () and Ludovica Almonti ()
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Stefano Deriu: University of Macerata
Claudio Socci: University of Macerata
Rosita Pretaroli: University of Macerata
Francesca Severini: University of Macerata
Ludovica Almonti: University of Macerata

Economia Politica: Journal of Analytical and Institutional Economics, 2024, vol. 41, issue 2, No 5, 417-438

Abstract: Abstract The dynamics of debt-to-GDP ratio is one of the major elements scrutinized by policymakers, especially in the present context characterized by the sequence of global financial crises, the Covid-19 pandemic and, more recently, armed conflicts in Europe. Such events call for greater public support to prevent economic collapse, raising questions about the sustainability of the sovereign debt. In this paper, we investigate the impact of selected shocks and policies on the debt-to-GDP ratio dynamics by adopting a disaggregated multi-sectoral Computable General Equilibrium model calibrated on the Social Accounting Matrix for Italy. Particularly, according to several scenarios, a rise in energy prices and a drop in exports are considered jointly with budget policies, regarding the expansion of public investment and alternative monetary policies, aimed at sustaining the economies from different perspectives. The impact of these scenarios is discussed in terms of changes in the main macroeconomic variables and dynamics of the debt-to-GDP ratio.

Keywords: Energy shocks; Fiscal and monetary policies; Public debt sustainability; CGE model; SAM; Italy (search for similar items in EconPapers)
JEL-codes: C68 E16 E43 E62 E65 H68 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s40888-024-00330-5

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