Franco Spinelli

The Long-Run Stability of the Demand for Money: Italy 1861 - 1996

This paper examines the stability of the demand for money in Italy using a newly extended data set for the period 1861–1996. We examine how the evolution of the financial system in Italy and policy shifts have affected the behavior of the long-run demand for money, and present tests of structural stability. We find the demand for broad money to be remarkably stable, despite periods of considerable economic turbulence. In addition, we present evidence on the monetary transmission mechanism. Our results shed light on attempts to model long-run relationships in other countries such as the UK and the US.

Maastricht: New and Old Rules

Thanks to the Maastricht Treaty and similar arrangements, central banks nowadays enjoy considerable independence. This is generally believed to be the result of relatively recent debates, which led to the conclusion that sheltering monetary authorities from the pressures of fiscal policymakers is a prerequisite for monetary stability. However, in history this point has in fact been a recurrent tenet. We start with David Ricardos arguments in favour of central bank independence and against monetisation of public deficits. After WWI, the latter issue was at the heart of the 1920 International Financial Conference of the League of Nations, which fostered and guided the establishment of many new central banks, and shaped various policymaking arrangements of todays monetary authorities.

The growth of government in Italy: Evidence from 1861 to 1979

ConclusionsThat the public sector has grown both in absolute terms and relative to the rest of the economy is an undisputable fact. That both growth rates have accelerated in recent history is also an unchallenged fact. More cautious must we be about why these trends have occurred and are persisting. We have tested three partially competing theories of government growth using Italian annual data from 1861 to 1979 and assessed that the redistribution model explains the facts better than either the public goods model or the specialized-interest hypothesis, although the latter tells the most convincing story about the causes underlying transfers to firms. We have also tried to discriminate between two competing views of a politician: the value-free intermediary found in the median voter literature and the entrepreneur emphasized in the theory of agency costs. The bits of evidence we gathered are more consistent with a politician-entrepreneur than a politician-intermediary.

Italian city-states and financial evolution

The term financial revolution has been abused in the literature. Revolution connotes a sharp and unique break from the past that should stand up to careful historical scrutiny, but in fact it does not. Evolution describes financial history better than revolutions. We compare the classic ‘financial revolutions’ with the financial innovations of Genoa, Venice and Florence in the Quattrocento and Cinquecento and the upshot is that these Italian city-states – the two maritime cities more than Florence – had developed many of the features that were to be found later on in the Netherlands, England and the United States. The importance of the early financial innovators has been eclipsed by the fact that these city-states did not survive politically. Instead, the innovations were absorbed in the long chain of financial evolution and, in the process, lost the identity of their creators.

The Phillips curve and the Italian lira, 1861–1998

We examine Italian inflation rates and the Phillips curve with a very long-run perspective, one that covers the entire existence of the Italian lira from political unification (1861) to the entry of Italy in the European Monetary Union (end of 1998). We first study the volatility, persistence and stationarity of the Italian inflation rate over the long run and across various exchange-rate regimes that have shaped Italian monetary history. Next, we estimate alternative Phillips equations and investigate the extent to which nonlinearities, asymmetries and structural changes characterize the inflation-output trade-off in the long run. We capture the effects of structural changes and asymmetries on the estimated parameters of the inflation-output trade-off relying partly on sub-sample estimates and partly on time-varying parameters estimated with the Kalman filter. Finally, we investigate causal relationships between inflation rates and output and extend the analysis to include the US and the UK for comparison purposes. The inference is that Italy has experienced a conventional inflation-output trade-off only during times of low inflation and stable aggregate supply.

The Evolution of European Central Bank Independence: An Updating of the Masciandaro and Spinelli Index

In an earlier paper in this journal, D. Masciandaro and F. Spinelli computed an index of central bank independence for a number of countries on the basis of the institutional arrangements in place in 1990. Since then the situation has changed and therefore that work needs an updating. This shows that the Bundesbank remains the most independent central bank, but several other central banks have increased their independence: see the cases of Spain, Italy, France, the Netherlands, and Great Britain. The Bank of Spain has registered the biggest improvement and the Bank of Portugal remains the least independent. Copyright 1998 by Scottish Economic Society.

The demand for money in the Italian economy: 1867-1965

Abstract This paper conducts an empirical analysis of the demand for money in Italy using data for the period 1867–1965. It finds that during this time this demand was a stable function of two key variables: permanent income and the rate of interest.

Fisher, Barro, and the Italian Interest Rate, 1845–93

There is a growing international literature on the determinants of long-run interest rates in the OECD economies (see inter alia Friedman and Schwartz, 1982; Summers, 1983, 1986; Barro, 1987; Barsky, 1987; Evans, 1987; Mankiw, 1987; Boudoukh and Richardson, 1993). However, this literature has neglected the experience of Italy. Italy’s experience is of interest because it has been more inflation prone than the other G7 countries, and has suffered from recurring fiscal deficits. It is, therefore, a natural testing ground for some of the main theories of interest rate determination. We focus on two issues in particular. First, we examine whether nominal interest rates have fully incorporated inflationary expectations (the “Fisher effect”) in an environment where inflation has been high and persistent. Second, we estimate the impact of fiscal policy on real interest rates in an attempt to verify the

Macroeconomic Instability and the Phillips Curve in Italy

The theme of this paper is whether there was a textbook-like inflation-output tradeoff in post-WWII Italy. We estimate both standard and time-varying parameter models of the relationship between inflation and the level of real economic activity over the 1949 to 2010 period and find no evidence of a stable, significant and positive association between output and prices. We attribute this evidence primarily to a fiscally dominated monetary policy and a rigid indexation mechanism aimed at protecting wages from inflation. These two institutions contributed to the persistent inflation bias and macroeconomic instability that lasted almost until the entry of the country in the European Monetary Union.

The wage-push hypothesis: The Italian case

Abstract In this paper an attempt has been made to find out the extent to which all the strike variables that I know of are correlated with the rate of wage inflation. The general conclusion is that the standard wage-push hypothesis performs very poorly.