Silvia Fabiani

Adjusting the External Adjustment: Cyclical Factors and the Italian Current Account

We investigate the role of cyclical factors in the adjustment of Italy’s external balance from 2010, developing a model that infers the potential levels of domestic demand and of imports and exports from an exogenous measure of potential output, in an internally coherent fashion and also taking composition effects into account. According to our results, in 2015 Italy’s cyclically-adjusted current account surplus came to about 0.5 percentage points of GDP; the overall external rebalancing of the Italian economy has largely been of a non-cyclical nature, with a positive contribution from the decline in the prices of energy commodities. By applying our methodology to the other major euro-area countries, we find that current account imbalances over the recent period are amplified when assessed in cyclically-adjusted terms.

Trading Processing for Goods: A Different View from the Past on Italian Trade Flows?

The new international standards for national accounts and balance of payments statistics (ESA 2010 and BPM6) introduced a new treatment of goods sent abroad for processing without changing ownership, now considered as an exchange of services. In this paper we explore to what extent this innovation affects the structural analysis of Italian trade flows, in particular along the geo-sectoral dimension. We also draw, for the first time, a detailed picture of exports and imports of processing services in order to shed light on how Italian firms participate, through this channel, in global value chains. Our findings largely validate the geo-sectoral interpretations based on the previous statistical standards. The data reveal that Italy is historically a net exporter of processing services, especially for high-technology products; flows are highly concentrated across destinations and sectors.