Vol.:(0123456789) Journal of Quantitative Economics (2019) 17:361–375 https://doi.org/10.1007/s40953-019-00157-z 1 3 ORIGINAL ARTICLE Government Expenditures and Revenues in Italy in a Long‑run Perspective Gordon L. Brady 1  · Cosimo Magazzino 2 Published online: 11 March 2019 © The Indian Econometric Society 2019 Abstract The aim of this study is to investigate the sustainability of Italian public accounts using in a long-run perspective, using empirical tests on sustainability and sol- vency of the country’s fscal policies. The results of unit root and stationarity tests show that government expenditures and revenues series are frst-diferences station- ary. The empirical analysis considered both the entire period and two sub-periods (1862–1913, 1947–2013). Furthermore, we conduct tests on cointegration, which evidence that a clear long-run relationship between public expenditure and revenues emerges only for the years 1862–1913. In essence, the paper’s results reveal that Italy have sustainability problems in the republican age. Keywords Fiscal policy · Sustainability · Time series · Italy JEL classifcation C22 · H11 · H60 · O52 Introduction Fiscal sustainability is an essential topic concerning both public policies and eco- nomics. The European Union (EU)’s treaties impose two constraints on budgetary policies: the government debt/GDP ratio should be < 60%, and the government def- cit/GDP should be < 3%. In the aftermath of the economic and fnancial crisis, many European countries face substantial fscal consolidation needs. That fscal sustain- ability is crucial has become more evident in the context of the recent crisis. In 2016 * Cosimo Magazzino cosimo.magazzino@uniroma3.it Gordon L. Brady GBrady6430@aol.com 1 Department of Economics, Bryan School of Business and Economics, University of North Carolina, Chapel Hill, USA 2 Department of Political Sciences, Roma Tre University, Rome, Italy