Non-linear budgetary policies: Evidence from 150 years of Italian public finance

Alessandro Piergallini and Michele Postigliola ()

Economics Letters, 2013, vol. 121, issue 3, 495-498

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
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:121:y:2013:i:3:p:495-498

DOI: 10.1016/j.econlet.2013.09.030

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