A Note on the (Un)Pleasant Arithmetic of Fiscal Policy: The Case of Italian Public Debt |
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Authors: | Luigi Marattin Massimiliano Marzo |
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Institution: | 1. Dipartimento di Scienze Economiche, University of Bologna, Strada Maggiore 45‐ Bologna, Italy;2. Corresponding author: Luigi Marattin. Tel: +39‐051‐2092606. E‐mail: luigi.marattin@unibo.it;3. Facoltà di Economia, University of Bologna, Piazza Scaravilli 2 – Bologna, Italy |
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Abstract: | Using the simple arithmetic of government budget constraint, we perform an illustrative analysis on the Italian case, investigating the consequences on the main public finance aggregates of the adoption of a fiscal policy rule responding to past real debt/GDP ratio. Such a rule, firmly grounded in the economic analysis, would allow the reduction of Italy's outstanding stock of debt without requiring the strict adherence to the 3 per cent criterion for deficit/GDP ratio, as prescribed by SGP (Stability and Growth Pact). We perform a forecasting exercise under five alternative scenarios and analyse the details of a structural debt reduction strategy with alternative yearly step. |
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Keywords: | E61 E62 H63 |
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