External constraint and economic growth in Italy: 1861-2000

Barbara Pistoresi () and Alberto Rinaldi

Department of Economics (DEMB) from University of Modena and Reggio Emilia, Department of Economics "Marco Biagi"

Abstract: This paper analyzes the relationship between external constraint and economic growth in Italy from 1861 to 2000. In particular, it investigates whether the persistent current account deficits in the 1861-1913 years constrained output growth. To this aim it studies the genesis of the current account fluctuations, that is whether these were generated by the dynamics of the GDP or by variations in capital inflows. Using integration and co-integration analysis and the Granger causality testing, it shows that in the long run Italy’s external position is sustainable: the Italian economy seems to have used the external deficits (surpluses) to smooth its aggregate consumption. Moreover in the shorter 1861-1913 sub-period, the persistent current account deficits, financed by foreign capital inflows, do not seem to have curbed economic growth.

Keywords: Current account; economic growth; Italy; Granger causality (search for similar items in EconPapers)
JEL-codes: F43 N1 N7 O11 (search for similar items in EconPapers)
Pages: pages 38
Date: 2013-05
New Economics Papers: this item is included in nep-fdg, nep-gro, nep-his and nep-opm
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:mod:dembwp:0011

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