Italy: Quantifying the Benefits of a Comprehensive Reform Package
IMF Working Papers, March 16, 2018
Source details
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- Italy: Quantifying the Benefits of a Comprehensive Reform Package
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Bibliographic details
- Authors: Michal Andrle, Alvar Kangur, Mehdi Raissi
- Published: March 16, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484347614.001
Summary
- Objective: Quantify the net benefits of a comprehensive reform package addressing Italy’s inter-related challenges.
- Approach: Simulates growth and competitiveness effects of a package of fiscal, financial, wage bargaining, and other structural reforms.
- Main high-level findings:
- Credible implementation of such a package yields substantial mediumterm dividends at negligible near-term growth costs.
- Real GDP growth is estimated to be substantially higher over the medium term.
- The real effective exchange rate depreciates notably.
Simulation approach and scope
- Models and tools referenced:
- GIMF simulation (IMF's Global Integrated Monetary and Fiscal).
- DSGE models referenced under keywords.
- Reform components simulated:
- Fiscal reforms.
- Financial-sector reforms (including measures relevant to Nonperforming loans and NPL ratio).
- Wage bargaining reforms.
- Product market reforms and other structural reforms affecting Total factor productivity and competitiveness.
Subject areas and keywords
- Subject: Financial institutions, Labor, Macrostructural analysis, Nonperforming loans, Production, Structural reforms, Total factor productivity, Wage bargaining
- Keywords: banking sector, competitiveness, competitiveness gain, DSGE models, fiscal policy, GDP, GIMF simulation, Global, growth, IMF's Global Integrated Monetary and Fiscal, Italy, labor market reforms, Nonperforming loans, NPL ratio, OECD estimate, product market reforms, real GDP, reform, Structural reforms, Total factor productivity, wage bargaining, WP
Principal findings and implications
- Growth and competitiveness:
- Mediumterm dividends from credible implementation are described as substantial.
- Near-term growth costs are described as negligible.
- Real GDP growth: estimated to be substantially higher over the medium term (phrase preserved as in source).
- Real effective exchange rate: depreciates notably (phrase preserved as in source).
- Policy-relevant channels highlighted:
- Reductions in NPL ratio and banking-sector repair to support credit provision.
- Wage-bargaining reforms to improve competitiveness.
- Product-market and other structural reforms to raise Total factor productivity.
- Fiscal reforms calibrated within the simulation framework to complement structural measures.
Practical takeaway for policymakers
- A coordinated package combining fiscal, financial, wage bargaining, and structural reforms can produce:
- Substantial mediumterm economic gains.
- Negligible near-term drag on growth if implementation is credible.
- Emphasis on credibility of implementation as critical to realizing the estimated benefits.
Source: IMF Working Paper — "Italy: Quantifying the Benefits of a Comprehensive Reform Package", Michal Andrle, Alvar Kangur, Mehdi Raissi, March 16, 2018.
Content in this bundle
- Italy: Quantifying the Benefits of a Comprehensive Reform Package, WP/18/60, March 2018