This article analyses possible targets for the Italian debt-to-GDP ratio with a small macroeconomic model. The role of international macroeconomic variables such as the US GDP growth, prices of raw materials, EUR/USD exchange rate and European Central Bank (ECB) monetary policy stance and domestic policy instruments is analysed in the debt dynamics. We find that external conditions play a fundamental role for the Italian fiscal consolidation. To reach a target of 100% of debt-to-GDP ratio by 2020, a further growth-sustaining policy has to be implemented.

This article examines the existence and stability of the consumption function in the United States of America (US) beginning in the 1950s. In order to obtain a stable long run relationship, we have introduced two innovative elements into the analysis of the life-cycle of the consumption function with wealth effects: 1) a shift level break in the cointegrating relationship, and 2) using inflation as an additional explanatory variable. By implementing a well structured estimation strategy, we found that after taking the level shift into account, a cointegrating equation, including inflation, exists and is more stable for the critical sub-samples than traditional consumption function models.

This paper estimates the steady state growth rates for the main European countries with an extended version of the Solow (1956) growth model. Total factor productivity is assumed a function of human capital, trade openness and investment ratio. We show that these factors, with some differences, have played an important role to improve the long run growth rates of Italy, Spain, France, UK, and Ireland. A few policies to improve the long-run growth rates for these countries are suggested.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in September 2009* The authors are grateful to Claudio Sardoni, Luigi Ventura, and Gennaro Zezza for helpful comments on a previous version of this paper. E-mail: paolo.casadio@yahoo.it; anto_paradiso@hotmail.com.The Levy Economics Institute Working Paper Collection presents research in progress by Levy Institute scholars and conference participants. The purpose of the series is to disseminate ideas to and elicit comments from academics and professionals.The Levy Economics Institute of Bard College, founded in 1986, is a nonprofit, nonpartisan, independently funded research organization devoted to public service. Through scholarship and economic research it generates viable, effective public policy responses to important economic problems that profoundly affect the quality of life in the United States and abroad.

Purpose -Considering the sectoral balance approach of Godley, and focusing only on the two main components of the private sector balance for the US economy (household and non-financial corporate balance), the purpose of this paper is to investigate the relationship between these two sectors, the financial variables, and economic cycle. In particular, the paper considers all these relationships endogenously. Design/methodology/approach -The authors estimate a structural VAR model between household and (non-financial) corporate financial balances, financial markets, and economic cycle and the authors perform an impulse response analysis. All the variables are expressed as cyclical components applying the Hodrick-Prescott filter. Findings -The main result is that: household and corporate balances react to financial markets in the way the authors expected and discussed; the economic cycle influences the two financial balances; the corporate balance has a positive impact on the cycle; the economic cycle and financial balances influence the financial variables. In particular, the point that shows that the corporate balance has a positive impact on the cycle shows that the corporate balance is a leading component of the cycle as suggested by Casadio and Paradiso and accords with Minsky's theory of financial instability.Research limitations/implications -The analysis does not include the foreign sector (current-account balance). Originality/value -This study is an important step forward with respect to the two main contributions in literature which use this approach: the Levy Institute macroeconomic team and Goldman Sachs. Methodologically their models are based on assumptions (such as exogeneity or market clearing price mechanism for the financial markets) that the authors overcome considering all the relationships studied in an endogenous manner.