Italian Treasury Research Articles

The Italian Treasury Dynamic Microsimulation Model: Data, Structure and Validation

The Italian Treasury Dynamic Microsimulation Model: Data, Structure and Validation

The Italian Treasury Dynamic Microsimulation Model (T-DYMM): Data, Structure and Baseline Results

The Italian Treasury Dynamic Microsimulation Model (T-DYMM): Data, Structure and Baseline Results

Demand Shocks for Public Debt in the Eurozone

AbstractIn this paper we use intraday government bond futures price changes around German and Italian Treasury auctions to identify unexpected shifts in the demand for public debt. Estimates show that positive demand shocks lead to large negative movements in Treasury yields. Evidence shows significant spillover effects into Treasury bond, equity, and corporate bond markets of other eurozone countries. We find interesting differences in the effects of demand shocks between the two countries, consistent with the “safe‐haven” status of German bonds versus the “high‐debt” status of Italian Treasuries. Results suggest that these effects are stronger during periods of high financial stress.

An Operational Protocol for the Valorisation of Public Real Estate Assets in Italy

The Italian Treasury Department reports that a quota of the country’s public real estate assets, with an estimated value of some 63 billion euros, consists of properties not directly utilised by the State Government and is therefore available for decommissioning alienation; in other words, for adaptive reuse. Numerous legislative initiatives dedicated to this issue over the past 30 years have produced very few comforting results. A plausible explanation for these shortcomings can be traced to the gap between established regulatory principles and the possibilities/capacities of local institutions to apply them. Put another way, legislation and indications, many of interest, have not been supported by adequate economic, structural, and organisational resources. The underlying question is, what is the structure of the decision-making process behind the sale or redevelopment of real estate assets? Beginning with these premises, this paper proposes an operational Business Process Modelling protocol that develops three different indexes—urban values index (Ivu), use index (Iut), and technical-maintenance index (Itm)—which may suggest three hypothetical scenarios of valorisation and three lines of action. A test of this model using a selection of public buildings owned by the City of Pescara showed it to be prognostic of some of the choices subsequently made by the municipal administration.

Demand Shocks for Public Debt in the Eurozone

In this paper we use high-frequency (intraday) government bond futures price changes around German and Italian Treasury auctions to identify unexpected shifts in the demand for public debt. Estimates show that positive demand shocks lead to large and persistent negative movements in Treasury yields. There is also evidence of significant spillover effects into Treasury bond, equity and corporate bond markets of other euro area countries. We find interesting differences in the effects of demands shocks between the two countries, which are consistent with the safe-haven status of German bonds versus the high-debt status of Italian Treasuries. Results also suggest that these effects are stronger during periods of high financial stress.

A Stochastic Estimated Version of the Italian Dynamic General Equilibrium Model (IGEM)

We estimate with Bayesian techniques the Italian dynamic General Equilibrium Model (IGEM), which has been developed at the Italian Treasury Department, Ministry of Economy and Finance, to assess the effects of alter-native policy interventions. We analyze and discuss the estimated effects of various shocks on the Italian economy. Compared to the calibrated version used for policy analysis, we find a lower wage rigidity and higher adjustment costs. The degree of prices and wages indexation to past inflation is much smaller than the indexation level assumed in the calibrated model. No substantial difference is found in the estimated monetary parameters. Estimated fiscal multipliers are slightly smaller than those obtained from the calibrated version of the model.

La tutela del risparmio nel pensiero e nell'azione del Governatore Baffi (The defence of savings: Governor Baffi’s belief and achievements)

Ten years after his death and twenty after his resignation from Banca d’Italia governorship, Paolo Baffi’s ideas and achievements as regards the protection of savings and the fight against a high and volatile inflation in the turbulent 1970s are reviewed. Against the backdrop of the constitutional precepts in this field, the proposals to shorten maturities and to index bond coupons, first advanced in the well known address Baffi delivered at Accademia Nazionale dei Lincei, were translated into Treasury decisions on public debt at his instigation. Moreover, in the concluding remarks he pronounced at the Banca d’Italia General Meeting of Shareholders between 1976 and 1979 there are many hints at problems and solutions that have become prominent in the 1980s and 1990s. JEL Codes: B31, E58 Keywords: Governor Baffi, Banca d’Italia, Bank of Italy, Italian treasury

The Italian Mezzogiorno: markets or policies?

Two authoritative institutions, the Italian Treasury and the OECD, have recently joined the debate on how best to promote the development of Southern Italy. While the former argued for a multi-faceted strategy emphasising the importance of increasing capital, the latter maintained that governments should refrain from policy activism and instead limit public intervention to infrastructure and public goods. The issue at stake, however, is not the crude one of whether development is best promoted by laissez faire or by intervention, but the much subtler one of the right proportions in which policies and market forces should be combined. The purpose of this brief note is to look at which of the two approaches is, in the light of past evidence, the one most likely to further Southern development.

Financial assets, public debt and monetary policy: an international integration perspective

This Report was prepared by a Committee chaired by Mario Sarcinelli (Director General of the Treasury) and was presented to the Italian Treasury Minister on 18 March 1987. The members of the Committee were Mario Arcelli, Corrado Conti, Felice Gianani, Lucio Izzo, Rainer S. Masera, Mario Monti, Antonio Pedone, Paolo Ranuzzi and Luigi Spaventa.

Assessing Policy Reforms for Italy using ITEM and QUESTIII

In this paper we assess the implications of policy reforms for the Italian economy by jointly using the Italian Treasury Econometric Model (ITEM) and QUEST III, the endogenous growth dynamic general equilibrium (DGE) model of the European Commission (DG ECFIN) in the version calibrated for Italy. We point out some of the key differences between the two models, highlighting some policy insights that DGE models can provide compared to those of traditional macro-econometric models. Their structural characteristics and the results of simulations are analyzed by using an array of shocks commonly examined in the evaluation of possible reforms. We show that two elements incorporated into the QUEST model play a key role in explaining the qualitative and quantitative differences among the two models in the dynamic responses to structural shifts, namely: the role of expectations in the transmission of reforms and the endogenous growth mechanism. We conclude that the joint consideration of the two models can improve our understanding of how the assessment of policy interventions is likely to be affected by the uncertainty surrounding model-based evaluation.

The Effects of Fiscal Policy in Italy: Estimates with a Svar Model

This paper studies the effects of fiscal policy on private GDP, inflation and interest rates in Italy using a structural Vector Autoregression. For this purpose a database of quarterly cash data for selected fiscal variables for the period 1982:1-2003:4 is constructed, largely on the basis of the information contained in the Italian Treasury Quarterly Reports. The main results of the study can be summarized as follows. A shock to government purchases of goods and services has a sizeable and robust effect on economic activity: an exogenous one per cent (in terms of private GDP) shock raises private real GDP by 0.6 per cent after 3 quarters. The response of GDP goes to zero after two years, reflecting with a lag the low persistence of the shock. The effects on private consumption and investment are positive; the reaction of inflation is also positive but limited and short-lived. In contrast, public wages, which in many studies are lumped together with purchases, have no significant effect on GDP in the short-run; a negative and significant effect emerges after two years. The reactions of inflation and interest rates are positive and larger than in the case of a shock to purchases. Finally, shocks to net revenue have negligible effects on all the macroeconomic variables.

Bidder Profitability Under Uniform Price Auctions and Systematic Reopenings: The Case of Italian Treasury Bonds

This paper analyzes the uniform price auctions for Italian Treasury securities in 1995-1996 and examines the revenue-efficiency of the auction mechanism, employing an extremely detailed dataset which includes all transactions made by the 41 primary dealers on the screen-based secondary market with their identity. The main findings are that initial auction discounts are negligible and not statistically different from zero. The feature of systematic reopening of a security significantly reduces the variance of price bids between the first and the following auctions, due to the information aggregation function of secondary market trading. Using various trading strategies, market-average price discounts in the reopenings are not statistically different from zero. Price discounts are affected inversely by auction participation, bidders’ competition and information dispersion. Finally, no individual primary dealer is able to capture a positive and significant price discount. From a policy viewpoint our evidence shows that, following the market reform of 1994 and the increase in competition caused by the entry of new international dealers, the uniform price auction mechanism together with systematic reopening has become an efficient selling technique for the Italian Treasury.

Periodic Information Asymmetry and Intraday Market Behaviour: An Empirical Analysis

The model of Foster-Viswanathan (1990, FV) predicts that information heterogeneity among market participants generates patterns in volume, trading costs and volatility. In the Italian Treasury bond market, periodic information asymmetry is related to the arrival of block orders from international investors, which cluster soon after the opening of the market and, respectively, of the US market. I find that volume is lower and trading costs are higher after the two openings, consistent with FV. I find only weak evidence that volatility behaves as implied by the model.

The Italian Treasury Econometric Model (ITEM)

Abstract In this paper, we provide a description of the Italian Treasury Econometric Model (ITEM). We illustrate its general structure and model properties, especially with regard to the economy's response to changes in policy and in other dimensions of the economic environment. One of the key features of the model is the joint representation of the economy on both the demand and the supply sides. Since it is designed for the needs of a Treasury Department, its public finance section is developed in great detail, both on the expenditure and revenue sides. It also features a complete modeling of financial assets and liabilities of each institutional sector. After documenting the model structure and the estimation results, we turn to the outcomes of model simulation and ascertain the model properties. In ITEM the shocks that generate permanent effects on output are associated with: a) variables that affect the tax wedge in the labor market and the user cost of capital; b) labor supply change; and c) variation in the trend component of TFP (technical progress). By contrast, demand shocks have only temporary effects on output.

Strategic Experimentation in a Dealership Market

We study the strategies of the market in the inter-dealer market. We show that market makers actively learn from the dealers they trade with and strategically react to the information content of the orders they receive. We identify hiding and experimenting as main types of market makers' strategies. We show how market makers in order to assess the informational content of the orders they receive. We provide empirical evidence of this, using a unique high-frequency dataset on the Italian Treasury Bond market disaggregated at dealer level.

The Effects of Fiscal Policy in Italy: Evidence from a VAR Model

This paper studies the effects of fiscal policy on private GDP, inflation and the long-term interest rate in Italy using a structural vector autoregression model. To this end, a database of quarterly cash data for selected fiscal variables for the period 1982:1-2004:4 is constructed, largely relying on the information contained in the Italian Treasury Quarterly Reports. The main results of the study can be summarized as follows. A shock to government purchases of goods and services has a sizeable and robust effect on economic activity: an exogenous one per cent (in terms of private GDP) shock increases private real GDP by 0.6 per cent after 3 quarters. The response goes to zero after two years, reflecting with a lag the low persistence of the shock. The effects on employment, private consumption and investment are also positive. The response of inflation is positive but small and short-lived. In contrast, public wages, which in many studies are lumped together with purchases, have no significant effect on output, while the effects on employment turn negative after two quarters. Shocks to net revenue have negligible effects on all the variables.

The Pricing of the Option Implicitly Granted by the Italian Treasury to the Specialists in the Reserved Auction Reopening

The Italian Government security primary market avails itself of a primary dealer system. This implies that the Treasury selects among Primary Dealers a group of intermediaries called Specialists, and a number of obligations and privileges are attached to their status. Academic literature paid scant attention to the right to participate in reserved auction reopenings. This consists in the right to buy predetermined additional quantities of Government securities at the price settled at the auction. I price this privilege as a call option written on the auctioned bonds in the framework of the Cox - Ingersoll - Ross model. I find that, although the one-day life, the option has a value significantly different from zero. Moreover, the option value helps explaining part of the mispricing occurring between the primary and secondary market. The segments characterized by higher option value are not only the segments where the costs from aggressive bidding on the primary market are balanced for a larger part by the option benefit, but also the segments whose exercise rate is higher. The calibration of the CIR model over two years also provides useful insights and opens an avenue for future research.

Italian Treasury: Lombardia.2005. The Alan Lomax Collection. Rounder Records CD 11661-1871-2. Recorded by Alan Lomax and Diego Carpitella. Selected, compiled, researched, and edited by Goffredo Plastino. Annotated by Bruno Pianta and Ellen Harold. 28 pp. of notes in English (including song texts in local dialects). Translation from Italian by Ellen Harold. 9 b/w photographs, 1 map. 10-item bibliography, 5-item discography.

Italian Treasury: Lombardia.2005. The Alan Lomax Collection. Rounder Records CD 11661-1871-2. Recorded by Alan Lomax and Diego Carpitella. Selected, compiled, researched, and edited by Goffredo Plastino. Annotated by Bruno Pianta and Ellen Harold. 28 pp. of notes in English (including song texts in local dialects). Translation from Italian by Ellen Harold. 9 b/w photographs, 1 map. 10-item bibliography, 5-item discography.

The effects of fiscal policy in Italy: Evidence from a VAR model

This paper studies the effects of fiscal policy on private GDP, inflation and the long-term interest rate in Italy using a structural Vector Autoregression model. To this end, a database of quarterly cash data for selected fiscal variables for the period 1982:1–2004:4 is constructed, largely relying on the information contained in the Italian Treasury Quarterly Reports. The main results of the study can be summarized as follows. A shock to government purchases of goods and services has a sizeable and robust effect on economic activity: an exogenous 1% (in terms of private GDP) shock increases private real GDP by 0.6% after 3 quarters. The response goes to zero after two years, reflecting with a lag the low persistence of the shock. The effects on employment, private consumption and investment are also positive. The response of inflation is positive but small and short-lived. In contrast, public wages, which in many studies are lumped together with purchases, have no significant effect on output, while the effects on employment turn negative after two quarters. Shocks to net revenue have negligible effects on all the variables.

Italian Treasury: Piemonte and Valle D'Aosta. 2004. The Alan Lomax Collection. Rounder CD 82161-1807-2. Recorded by Alan Lomax and Diego Carpitella. Selected, compiled, researched, and edited by Goffredo Plastino. Annotated by Franco Castelli and Rosito Champrétavy. 38 pages of notes in English (including song texts in local dialects). Translations from Italian by Ellen Harold. 5 B/W photographs, 1 map. 18-item

Italian Treasury: Piemonte and Valle D'Aosta. 2004. The Alan Lomax Collection. Rounder CD 82161-1807-2. Recorded by Alan Lomax and Diego Carpitella. Selected, compiled, researched, and edited by Goffredo Plastino. Annotated by Franco Castelli and Rosito Champrétavy. 38 pages of notes in English (including song texts in local dialects). Translations from Italian by Ellen Harold. 5 B/W photographs, 1 map. 18-item bibliography, 5-item discography. 1 compact disc, 35 tracks (74:28). Recorded in the field in 1954-55. - Volume 37