The Bank of Italy Econometric Model: An Update of the Main Equations and Model Elasticities

Bulligan, Guido; Busetti, Fabio; Caivano, Michele; Cova, Pietro; Fantino, Davide; Locarno, Alberto; Rodano, Maria Lisa

doi:10.2139/ssrn.3040651

Cited by 17 publications

(9 citation statements)

References 16 publications

(25 reference statements)

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“…The latest model update is inBulligan et al (2017). A detailed description of the main features of the model can be found inGalli, Terlizzese, and Visco (1989).…”

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confidence: 99%

A Stock-Flow Consistent Quarterly Model of the Italian Economy

Zezza

2020

SSRN Journal

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Macroeconomists and political officers need rigorous, albeit realistic, quantitative models to forecast the future paths and dynamics of some variables of interest while being able to evaluate the effects of alternative scenarios. At the heart of all these models lies a standard macroeconomic module that, depending on the degree of sophistication and the research questions to be answered, represents how the economy works. However, the complete absence of a realistic monetary framework, along with the abstraction of banks and more generally of real-financial interactions-not only in dynamic stochastic general equilibrium (DSGE) models but also in central banks' structural econometric models-made it impossible to detect the rising financial fragility that led to the Great Recession.In this paper, we show how to address the missing links between the real and financial sectors within a post-Keynesian framework, presenting a quarterly stock-flow consistent (SFC) structural model of the Italian economy. We set up the accounting structure of the sectoral transactions, describing our "transaction matrix" and "balance sheet matrix," starting from the appropriate sectoral data sources.We then "close" all sectoral financial accounts, describe portfolio choices, and define the buffer stocks for each class of assets and sector in the model. We describe our estimation strategy, present the main stochastic equations, and, finally, discuss the main channels of transmissions in our model.

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“…The latest model update is inBulligan et al (2017). A detailed description of the main features of the model can be found inGalli, Terlizzese, and Visco (1989).…”

mentioning

confidence: 99%

A Stock-Flow Consistent Quarterly Model of the Italian Economy

Zezza

2020

SSRN Journal

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“…Real output is proxied by firms' value added, again computed at constant prices. The real user cost of capital is proxied by the sum of the real interest rate and the depreciation rate of capital, as in Bulligan et al (2017). In turn, the real interest rate is computed as a weighted average of the short and long-term nominal bank lending rates to non-financial corporations, sourced from Banca d'Italia, net of oneyear ahead inflation expectations, provided by Consensus Economics.…”

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confidence: 99%

Forecasting Corporate Capital Accumulation in Italy: The Role of Survey-Based Information

2021

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While there is a vast macroeconomic literature that singles out the main drivers of capital accumulation in advanced economies during and after the global financial and sovereign debt crises' recessionary phase, there is much less research seeking to identify both models and variables that possess out-of-sample forecasting ability for gross fixed capital formation. Moreover, micro-founded variables are scarcely employed in macroeconomic forecasting of real investment. We fill this gap by considering a battery of univariate and multivariate time-series models to forecast investment of non-financial corporations in Italy, an interesting case study due to its steep downturn during the two afore-mentioned crises. We find that a vector error correction model augmented with firm survey-based variables accounting for business confidence, demand uncertainty and financing constraints generally outperforms the autoregressive benchmark and a series of competing multivariate time-series models in various, alternative, evaluation samples that take into account the impact of both the global financial crisis and the sovereign debt crisis on forecast accuracy.

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“…An increase in the two indicators here signals an improvement in price competitiveness. 58 The BIQM is the large-scale macro-econometric model that is used to forecast the developments of the Italian economy in Banca d'Italia within the Broad Macroeconomic Projection Exercise coordinated by the ECB (Busetti, Locarno and Monteforte, 2005;Bulligan et al, 2017). 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 BIQM price competitiveness indicator PPI-based price competitiveness indicator…”

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confidence: 99%

Back on Track? A Macro–Micro Narrative of Italian Exports

et al. 2018

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We provide an in-depth analysis of Italy's export performance relative to the other main euro-area countries over the last two decades, using both macro and micro data. We argue that the relatively unsatisfactory performance of Italian goods exports until the eve of the 2008-09 crisis is the result of the interplay between the appreciation of the real effective exchange rate, the initial specialization in types of production that were particularly exposed to increasing competition from low-wage countries, and the size distribution of exporters, skewed towards small firms. Since 2010 signs of structural improvement have emerged, alongside cyclical factors, in connection with a shift in the specialization of exports towards sectors that are less exposed to competitive pressures and particularly effective in activating domestic value added. Moreover, the selection process triggered by the exceptional difficulties encountered by micro and small firms both before and during the global financial crisis might have structurally strengthened the population of Italian exporters, making it more resilient to negative shocks and more capable of keeping pace with external demand.

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The Bank of Italy Econometric Model: An Update of the Main Equations and Model Elasticities

Cited by 17 publications

References 16 publications

A Stock-Flow Consistent Quarterly Model of the Italian Economy

A Stock-Flow Consistent Quarterly Model of the Italian Economy

Forecasting Corporate Capital Accumulation in Italy: The Role of Survey-Based Information

Back on Track? A Macro–Micro Narrative of Italian Exports

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