The Italian Treasury Econometric Model (Item)

Government of the Italian Republic (Italy), Ministry of Economy and Finance, Department of the Treasury Working Paper No. 1

40 Pages Posted: 11 Jun 2009

See all articles by Claudio Cicinelli

Claudio Cicinelli

Government of the Italian Republic (Italy) - Department of the Treasury; Consip SPA

Andrea Cossio

Government of the Italian Republic (Italy) - Department of the Treasury; Consip SPA

Francesco Nucci

University of Rome I

Ottavio Ricchi

Government of the Italian Republic (Italy) - Ministry of Economy and Finance - RGS

Cristian Tegami

Government of the Italian Republic (Italy) - Department of the Treasury; Consip SPA

Date Written: February 1, 2008

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. The model has a quarterly frequency and includes 371 variables. Out of these, 124 are exogenous and 247 endogenous. The model structure features 36 behavioral equations and 211 identities. One of the key features of the model is the joint representation of the economic environment on both the demand and the supply side. 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 side. 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) variation of variables that affect the tax wedge in the labor market and the user cost of capital; b) labor supply change; c) variation in the trend component of TFP (technical progress). By contrast, variables that exert their effects on the demand side have only temporary effects on output. We also perform in-sample dynamic simulation of the model. This allows us to derive simulated values of all the endogenous variables which can be compared with the corresponding actual values. This allows us to appraise, for each aggregate, whether the simulated values track the observed data.

Keywords: C51, C52, E60

JEL Classification: Macroeconometric Models, Economic Policy

Suggested Citation

Cicinelli, Claudio and Cossio, Andrea and Nucci, Francesco and Ricchi, Ottavio and Tegami, Cristian, The Italian Treasury Econometric Model (Item) (February 1, 2008). Government of the Italian Republic (Italy), Ministry of Economy and Finance, Department of the Treasury Working Paper No. 1. Available at SSRN: https://ssrn.com/abstract=1415968

Claudio Cicinelli (Contact Author)

Government of the Italian Republic (Italy) - Department of the Treasury ( email )

Via XX Settembre, 97
Rome, 00187
Italy

HOME PAGE: http://www.dt.mef.gov.it/it/analisi_programmazione_economico_finanziaria/working_papers_prodotti_ric

Consip SPA ( email )

Direzione Acquisti in Rete della Pubblica Amminist
Via Isonzo, 19/E
00198 Roma
Italy

Andrea Cossio

Government of the Italian Republic (Italy) - Department of the Treasury ( email )

Via XX Settembre, 97
Rome, 00187
Italy

HOME PAGE: http://www.dt.mef.gov.it/it/analisi_programmazione_economico_finanziaria/working_papers_prodotti_ric

Consip SPA ( email )

Direzione Acquisti in Rete della Pubblica Amminist
Via Isonzo, 19/E
00198 Roma
Italy

Francesco Nucci

University of Rome I ( email )

Piazzale Aldo Moro
Rome, 00185
Italy
+39 06 4991 0847 (Phone)
+39 06 445 3246 (Fax)

Ottavio Ricchi

Government of the Italian Republic (Italy) - Ministry of Economy and Finance - RGS ( email )

Via XX Settembre 97
Rome
Italy
39-06-47614774 (Phone)

Cristian Tegami

Government of the Italian Republic (Italy) - Department of the Treasury ( email )

Via XX Settembre, 97
Rome, 00187
Italy

Consip SPA ( email )

Direzione Acquisti in Rete della Pubblica Amminist
Via Isonzo, 19/E
00198 Roma
Italy

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