Fiscal deficits under financial pressure and insolvency: Evidence for Italy, Greece and Spain

Trachanas, Emmanouil; Katrakilidis, Constantinos

doi:10.1016/j.jpolmod.2013.03.013

Cited by 24 publications

(13 citation statements)

References 71 publications

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“…The purpose of this paper is to investigate the extent of fiscal sustainability of ten Euro member countries and the whole union as well as evaluating whether or not the suggested 9 The results at the national level are consistent with the ones reported on Italy and Spain by Trachanas and Katrakilidis (2013) appear to be structurally unsustainable due to their large accumulated stock of debt. To achieve sustainability, the countries need to take drastic steps to reduce their stock of debt whilst pursuing economic reform for a long-run sustainability.…”

Section: Conclusion Policy Implementations and Limitationmentioning

confidence: 63%

“…For example, Papadopoulos and Sidiropoulos (1999), De Castro and Hernandez de Cos (2002), Trachanas & Katrakilidis (2013), Arghyron and Luintel (2007), Bajo-Rubio et al (2009), and Legrenzi and Milas (2012) have found evidence that supports the existence of fiscal sustainability in countries that include Greece, Italy, and Spain. Afonso (2005) and Corsetti and Roubini (1991), on the other hand, reported results that indicate nonsustainability of the fiscal position of the countries.…”

Section: Introductionmentioning

confidence: 98%

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Fiscal Sustainability in the Euro-Zone: Is There A Role for Euro-Bonds?

Ahmad

Fanelli

2014

Atl Econ J

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Section: Conclusion Policy Implementations and Limitationmentioning

confidence: 63%

Section: Introductionmentioning

confidence: 98%

Fiscal Sustainability in the Euro-Zone: Is There A Role for Euro-Bonds?

Ahmad

Fanelli

2014

Atl Econ J

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“…In order to examine the stationarity properties of the time series, we apply different unit root tests: the Augmented Dickey and Fuller (ADF, 1979) test, determining the number of lags using the Hannan-Quinn criterion; the Elliott, Rothenberg, and Stock (ERS, 1996) test, setting the maximum lag according to the method proposed by Schwert (1989); the Phillips and Perron (PP, 1988) Once we found that the variables are non-stationary at their levels and are in the same order of the integration, we can apply the cointegration test. As in Trachanas and Katrakilidis (2013), we performed several cointegration tests, to check the robustness of the results.The ARDL bounds testing approach of cointegration is developed by Pesaran and Shin (1999) and Pesaran et al (2001). This approach has several advantages over the traditional cointegration approaches of Engle and Granger (1987), and Johansen and Juselius (1992).…”

Section: Methodsmentioning

confidence: 99%

Sustainability of Italian budgetary policies: a time series analysis (1862-2013)

Brady

Magazzino

2017

Eur J Gov Econ

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In this paper, we analyze the sustainability of Italian public finances using a unique database covering the period 1862-2013. This paper focuses on empirical tests for the sustainability and solvency of fiscal policies. A necessary but not sufficient condition implies that the growth rate of public debt should in the limit be smaller than the asymptotic rate of interest. In addition, the debt-to-GDP ratio must eventually stabilize at a steady-state level. The results of unit root and stationarity tests show that the variables are non-stationary at levels, but stationary in first-differences form, or I(1). However, some breaks in the series emerge, given internal and external crises (wars, oil shocks, regime changes, institutional reforms). Therefore, the empirical analysis is conducted for the entire period, as well as two sub‐periods (1862‐1913 and 1947‐2013). Moreover, anecdotal evidence and visual inspection of the series confirm our results. Furthermore, we conduct tests on cointegration, which evidence that a long-run relationship between public expenditure and revenues is found only for the first sub-period (1862-1913). In essence, the paper’s results reveal that Italy have sustainability problems in the Republican age.

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“…The empirical evidence by Piergallini and Postigliola (2012) shows the occurrence of a significantly positive reaction of primary surpluses to debt when the debt/GDP ratio exceeded the trigger value of 110%. Accounting for structural breaks, Trachanas and Katrakilidis (2013) suggested that the sustainability of the fiscal deficits in Italy holds only in a weak sense. Bartoletto et al (2013) found that the dynamic of Italian public debt in the period 1861-2010 can be considered as sustainable, with the exception of the two World War years .…”

Section: Empirical Literaturementioning

confidence: 99%

A wavelet analysis of Italian fiscal sustainability

Magazzino

Mutaşcu²

2019

Economic Structures

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The aim of this paper is to reassess the relationship between public primary deficit and debt (as GDP ratios), in order to test for Italian fiscal sustainability over the period 1862-2013. Italy has the second largest public debt/GDP ratio, and it represents the third economy in the European Union (EU), so that its public accounts stability is crucial for the whole area (Brady and Magazzino 2017a).The main problem for Italy, however, besides its high existing debt on which it is paying high interest in absolute terms, is that its growth is too slow. Since the euro area was founded, Italy's average annual real growth was 0.4%, just marginally above the lowest rate of 0.3% per annum for Greece and one percentage point below the mean value for the overall euro area. Italy's low growth rate, in turn, can be attributed to several structural causes. The country has recorded near zero productivity growth for years, and businesses are often very small, focus on the domestic market, and invest too little in R&D. Major inefficiencies exist in administration, e.g. in the justice system, and capital intensity is too low, also because investment declined by as much as 30% after the financial crisis. This was recently exacerbated by problems in the banking sector, including as a result of poor investment decisions in the past and short survival rates of governments over a long period, which have led to frequent election campaigns and delays in economic policy.Time domain analysis is the most widespread approach in the economic literature to study time series. Through such approach, the evolution of individual variables is modelled and multivariate relationships are assessed over time. Another strand of literature focuses on the frequency domain. Wavelets analysis reconciles both approaches, in the sense that both time and frequency domains are taken into account. With this approach, AbstractIn this paper, we analyse the relationship between public primary deficit and debt for Italian sustainability over the 1862-2013 years. Our empirical strategy uses the wavelet analysis. The empirical evidence suggests the presence of a substantial fiscal sustainability in the long run for Italy. This reversed much of the results of previous empirical literature, due to traditional time series approach and a shorter time horizon. which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.

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Fiscal deficits under financial pressure and insolvency: Evidence for Italy, Greece and Spain

Cited by 24 publications

References 71 publications

Fiscal Sustainability in the Euro-Zone: Is There A Role for Euro-Bonds?

Fiscal Sustainability in the Euro-Zone: Is There A Role for Euro-Bonds?

Sustainability of Italian budgetary policies: a time series analysis (1862-2013)

A wavelet analysis of Italian fiscal sustainability

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