Indicators and Tests of Fiscal Policy Sustainability: The Italian Case 19702006,Used

Indicators and Tests of Fiscal Policy Sustainability: The Italian Case 19702006,Used

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The issue of sustainability of Italian fiscal policy in the period 19702006 is studied with two instruments: indicators and tests. The indicators Primary Gap, Tax Gap developed by Chouraqui et al. (1990) and S2 by the European Commission show a non sustainable fiscal policy. Tests of sustainability following Trehan and Walsh (1988), Hakkio and Rush (1991) and Bohn (2008) show an opposite result accepting the sustainability path of fiscal variables. According to the strategy proposed by De Luzenberger and Marini (1993) a Chowtype test, that confirms a systematic change of fiscal policy in 19921993, permits to discern the two conflicting results in favor of the indicators' response.

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