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Cliometrica

, Volume 2, Issue 3, pp 259–274 | Cite as

The quest for a fiscal rule: Italy, 1861–1998

  • Roberto Ricciuti
Original Paper

Abstract

The Italian fiscal history is characterised by a number of fiscal consolidations. In this study, we characterise fiscal policy in terms of non-linear deterministic processes. We find that government spending and taxes can be described as being non-linear trend stationary processes instead of unit roots. A long run equilibrium relationship—a non-linear co-trend—does exist between the two series, fulfilling the intertemporal government budget constraint. We interpret this result as evidence of a long run fiscal rule that different policy makers have adopted, putting public finance in balance.

Keywords

Intertemporal government budget constraint Non-linear trend stationarity Non-linear co-trending 

JEL Classification

E620 H62 N100 

Notes

Acknowledgment

Comments by Alastair Hall on a previous paper with a related topic led to the reasoning behind this work. David Cushman provided useful insights. Comments and suggestions from Pier Paolo Pierani, Giandomenico Piluso and Luciano Segreto and two anonymous referees helped to improve the paper. I thank them without implications.

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Copyright information

© Springer-Verlag 2007

Authors and Affiliations

  1. 1.Dipartimento di Studi sullo StatoUniversity of FlorenceFirenzeItaly
  2. 2.CESifoMunichGermany
  3. 3.Robert Schuman Centre for Advanced Studies, EUISan Domenico di FiesoleItaly

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