Causes of the decline of economic growth in Italy with special reference to the post-euro period: a balance-of-payments approach

Elias Soukiazis (), Pedro Cerqueira and Micaela Antunes

Review of Keynesian Economics, 2015, vol. 3, issue 4, 491—516

Abstract: The aim of this paper is to investigate the causes of the poor growth performance in Italy and the responsibility of the euro for this crisis. The theoretical approach applied is based on the balance-of-payments constraint hypothesis (known as Thirlwall's law), adapted to include internal and external imbalances. Our empirical analysis shows that both the extended model and the original Thirlwall's law over-predict the actual growth in Italy, suggesting that there are supply constraints that impede the economy from growing faster. Another conclusion is that part of the decline in economic growth is explained by the loss of competiveness during the euro period. A scenario analysis shows that a budget deficit and public debt discipline aiming at achieving the goals of the Stability Pact are not significant stimuli for faster growth. On the other hand, reducing the import dependence of the components of demand, or reducing the import and increasing the export shares in the economy, are the most effective policies for fostering growth in Italy.

Keywords: internal and external imbalances; import elasticities of the components of demand; equilibrium growth rates; 3SLS system regressions (search for similar items in EconPapers)
JEL-codes: C32 E12 H6 O4 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.elgaronline.com/abstract/journals/roke/3-4/roke.2015.04.04.xml (application/pdf)
Restricted access

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:elg:rokejn:v:3:y:2015:i:4:p491-516

Access Statistics for this article

Review of Keynesian Economics is currently edited by Thomas Palley, Matías Vernengo and Esteban Pérez Caldentey

More articles in Review of Keynesian Economics from Edward Elgar Publishing
Bibliographic data for series maintained by Phillip Thompson ().