UK's NIESR Simulates Italy Near-term Macroeconomic Conditions

.@marta_lopresto & @amit_kara use the @NIESRorg #NiGEM #Macroeconomic model to simulate the macroeconomic effect on #Italy – both 4m the current political uncertainty, & the case where 5Star-Lega form a government that enacts #FiscalStimulus, latter w the following assumptions: pic.twitter.com/52ZvqTIJ8k

— Satyen Baindur (@Satyen_Baindur) June 2, 2018

Results: Year 1 - slight GDP expansion (from baseline of ~1.4%), but larger contractions (also from baseline) over the next 2 years with no real change in GDP growth rate; unemployment declines marginally Year1, but goes back up next 2 years; however #FiscalDeficit increases ~5%. pic.twitter.com/zNXIeaMNbL

— Satyen Baindur (@Satyen_Baindur) June 2, 2018

The upside risk to this scenario, which the authors think unlikely, is from the coalition negotiating more fiscal space with the #EuropeanCommission (which might condition that on #StructuralReforms that boost productivity…) which might lower the investment premium etc...

— Satyen Baindur (@Satyen_Baindur) June 2, 2018

Could Italy Exit the Eurozone, or even the European Union?

.@piie In tightly argued piece reversing a previous position - that #ItalExit 4m #EMU & even 4m #EU could conceivably come 2 pass, @ojblanchard1, @jzettelmeyer & @smerler finally conclude that saner minds in the Italian Senate @SenatoStampa or a Presidential veto might prevent it pic.twitter.com/uY1xjLSB57

— Satyen Baindur (@Satyen_Baindur) May 25, 2018

The situation is rich, one might add, w ironies - although 'veto' itself is a Latin word, and the concept originated in ancient Rome as the 'intercessio' meant to empower tribunes on behalf of Plebeians against Patricians - modern Italy actually has only a weak Presidential veto

— Satyen Baindur (@Satyen_Baindur) May 25, 2018

...which can be overridden by a simple majority in Parliament. In discussing how the @ecb's #QuantitativeEasing may not apply to Italian bonds after a downgrade, one might note also that the current @ecb President is a former @bancaditalia Governor (& continuing as Emeritus...)

— Satyen Baindur (@Satyen_Baindur) May 25, 2018

Euro Area Reform and the Case of Italy

'#Italy's fiscal problems arise not from recent profligacy - except 2009 (imm post-#GFC), its primary balance (ie excluding interest payments) has been surplus for 2 decades.' The root cause is high debt 4m 1980s & low growth post-1998 #EMU; plus 'cronyism & familyism' @zingales https://t.co/rgeCw31ey2

— Satyen Baindur (@Satyen_Baindur) May 6, 2018

.@voxeu @GuntramWolff on #EuroArea's structural weakness & macroeconomic imbalance: priority that #Germany address its low investment, #France its overly high & inefficient government expenditure; & #Italy its low productivity growth & weak institutions. https://t.co/UF0wnhh0ka

— Satyen Baindur (@Satyen_Baindur) May 6, 2018

Will Eurozone Quantitative Easing End in Time for Monetary Policy Normalization?

#QuantitativeEasing in the #Eurozone may continue till 1Q2019, which means the first rate increases, which can only come after it ends, may leave rates too low to have an impact if @ecb needs to lower them further @ the next downturn. via @elerianm @FT https://t.co/YwBDDCFmY3

— Satyen Baindur (@Satyen_Baindur) April 26, 2018