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Austerity policies embraced after 2009 in the European union have been very controversial both in political and academical debate. While its supporters claim that fiscal adjustment is necessary to restore the sustainability of public finances, critics argue that the negative effect of austerity on economic growth is so large that it may even be counterproductive. Indeed, the improvement of fiscal position and the debt to GDP ratio has been much slower and fiscal multipliers considerably larger than expected , suggesting that self-defeating austerity might be a realistic possibility. This work will examine various aspects that determine the effectiveness of fiscal policy in reducing the debt to GDP ratio, such as the initial level of debt, tax and expenditure levels, size and timing of consolidation, long run effect on economic growth. The focus will be on the sensitivity of debt to GDP projections to the underlying assumptions, to highlight the complex trade-offs of different policy options. This thesis is organized as follows: chapter 2 is devoted to the development of the general analytical framework used and its relations with previous works; in chapter 3 we will study the properties of the model through a simulation exercise under different parametrizations; in chapter 4 we will compare these results with the European countries in the period after the financial crisis. Some conclusive remarks (chapter 5) follow.

The issue of public debt is not new for our country and, over time, its ratio to GDP has always been high and persistent. At the end of the Seventies, once those characteristics that had held back its increase disappeared, such as a significant economic growth and a low interest rate thanks to an accommodating monetary policy, the debt-to-GDP ratio progressively increases in relative and absolute terms. By breaking down the contributions made by budgetary policies and nominal growth in influencing the dynamics of the debt-to-GDP ratio, this work wants to examine, in a historical perspective (1861-2019), the reasons behind its evolution. ; Il problema del debito pubblico non è nuovo per il nostro paese e, nel corso del tempo, il suo rapporto rispetto al Pil è sempre stato elevato e persistente. Alla fine degli anni Settanta, una volta venute meno quelle caratteristiche che avevano contenuto l'incremento di tale rapporto, come la significativa crescita economica e un contenuto tasso di interesse favorito da una politica monetaria accomodante, si assiste progressivamente a un suo aumento significativo non solo in termini relativi ma anche assoluti. Scomponendo i contributi apportati dalle politiche di bilancio e dalla crescita nominale del prodotto nell'influenzare la dinamica del rapporto debito/Pil, tale lavoro vuole ricostruire, in una prospettiva storica (1861-2019), le ragioni alla base della sua evoluzione.

The aim of this work is to present and investigate a model that departs from three considerations. First, fiscal policy and debt sustainability are two sides of the same coin: the former is the policy instrument that government manages in the present time to achieve its social objectives, whereas, the latter is the repercussion of the former in the long run. Second, fiscal policy has a direct impact on industries capital accumulation because it affects the available income and, therefore, their savings; such an impact can be evaluated through the intertemporal optimization of industries saving decisions. Finally, fiscal policy has to be characterized on both the revenue and the spending side: revenues are determined through a unique tax rate, while spending is represented as an industry-based subsidy with a fixed fraction, Φ, that must be re-invested in capital. The production function in each industry is assumed AK and investment is subjected to quadratic adjustment costs. The consequences of assuming a convex adjustment cost function are twofold: the model does not display growth in the long run and the invested capital due to the public incentivization program hyper-crowds out private saving, consequently the optimal Φ is 0. Another advantage, due to the simplicity of the framework, is that the notion of debt sustainability, contrary to the majority of literature on fiscal policy sustainability, is defined unambiguously therefore it is always possible to determine whether a certain public debt can be sustained. In section 4, the model is solved as a Nash bargaining problem by assuming an explicit welfare function and it is found that the optimal government size results undetermined whenever the optimal Φ is 0. However, in the conclusions, it is proposed a way to modify slightly the model in order to overcome the problem of the hyper-crowding-out and letting the designed public program of capital incentivization work effectively.

Since the Great Recession, many Eurozone nations have seen their public debt levels increase greatly. By 2010, a member of the monetary union found itself unable to continue servicing its debt and made investors fear for the euro currency. The crisis was resolved thanks to a bailout of supranational organizations. Regardless, government debt from European nations is perceived as risk-free. The European Central Bank, through unconventional monetary policy and the mass purchase of government bonds, has managed to bring nominal interest rates to historical lows and governments have been able to continue borrowing without causing inflation on goods and services. Stock and commodity prices have, since 2010, increased more than the Eurozone's aggregate output. Similarly, home prices have increased more than aggregate GDP since the implementation of the euro. Given the historical precedents of currency and debt crises, it is necessary to question if investors should rationally expect the repayment of the real value lent to the various Eurozone governments.

The financial crisis affecting European Monetary Union (EMU) since late 2008 led to the deterioration of credit quality of several countries in the Eurozone. The thesis explores both financial and macroeconomic issues of such debt crisis. The goal is to infer a cross-country sovereign risk measure in order to monitor and anticipate perilous recessive spirals which might lead to default. In the first part, results on risk-neutral pricing of defaultable claims are applied to government bonds, so that idiosyncratic risk premia decompositions are available for any EMU country. The sovereign risk portion is detachable with the use of standardized Credit Default Swaps (CDS) contracts. Dynamic term structures of hedging portfolios are coherently retrievable in this new standard market, bringing forth a set of default-free sovereign term structures. A comparison of these latter to money-market rates induces an alternative definition of the CDS-bond basis. The determinants of synthetic-cash credit market arbitrage opportunities are to be investigated within a full macro-financial environment.This motivates the second part of this work. The well-known prociclicality of the banking sector in real business cycle plays a central role in the exacerbation of economic crises. In this sense, credit crunch and increase in global risk aversion of investors may induce both safe-haven (liquidity floods) and default (liquidity dries-up) phenomena, attributable to shifts in sovereign debt demand curves. The aim becomes thus to construct a dynamic score which allows to detect the 'point of no return', beyond which target country cannot increase its debt level whatever the premium provided in yields, because of a lack of investors willing to buy it. A pure econometric approach is unsatisfacory, so the analysis evolves with the economic backdrop provided by the analysis of Ponzi borrowing schemes. Positive growth rates of debt-to-gdp ratios evaluated at market yields induce a dynamic scoring which can be compared to risk-neutral hazard rates, and be used to compute a physical default metric. Cointegration analysis shows long-run equilibria between the two default probability measures in non-core countries. This proves that both macroeconomic and financial conditions pace a common long-term path as instructed by the joint macro-financial situation of target distressed country.

The empirical analysis of the effects of government policies on the incentives of economic agents is the leitmotif of the present thesis, with two distinct fields of application. While the first essay mostly contributes to the empirical banking literature, with a focus on the link between implicit guarantees for bank debt and political connections in Europe, the second one contributes to the field of education economics and is devoted to an analysis of the effects of bibliometric-based hiring and promotion schemes in Italian public universities on scholars' productivity. The two essays also share some methodological affinities. First, the two projects exploit two different identification strategies that have the common ambition of isolating and estimating a causal effect of public policies on the outcomes of interest. Second, the two works are characterized by the use of two original datasets, that have been obtained merging multiple sources of data, some of them pre-existing and others that have been hand-collected. Finally, the two essays share the novelty of the research questions they aim to answer, which are relatively unexplored by the existing literature.

This study seeks to understand the effect of institutions on debt sustainability in low- and middle-income countries (LMICs). This is motivated by rising government debt levels due to the COVID-19 pandemic and China's Debt-Trap Diplomacy which has undermined the sovereignty of many LMICs. The study proposed a dynamic debt model which relates the ratio of debt-to-GDP as a function of interest rates, exchange rate, primary budget balance, institutions and a vector of controls such as inflation and foreign currency reserves, whereby the ratio of debt-to-GDP measures debt sustainability and the interest rate measures the cost of debt. It also includes the lag of the ratio of debt-to-GDP to capture the debt dynamics in LMICs. To estimate the model, I used an annual data from the WDI from 2005 to 2018 for a total of 135 countries which gives a total of 1890 observations to estimate the effects of institution on debt sustainability in LMICs. To check the robustness of the effects of institutions on debt sustainability in LMICs, I also used institutional data from the WGI. Moreover, I also make a pre-estimation analysis to understand the nature and distribution of the collected data so as to identify the most appropriate estimation for an accurate and reliable result for statistical inference. The results show that having institutions is not enough to achieve debt sustainability, these institutions must be active in controlling corruption and improving transparency and accountability in the public sector. In the absence of active and strong institutions to ensure transparency in contracts, debt statistics and allocation, public debt is more likely to be embezzled and use for non-productive programs especially during election cycles.

L'esperienza della politica di bilancio nell'Italia del secondo dopoguerra è stata caratterizzata dall'applicazione impropria e perversa delle politiche economiche tradizionali ispirate alla finanza funzionale keynesiana, una circostanza le cui responsabilità ricadono su una classe politica che, anche ai fini del mantenimento del consenso, ha lasciato che si formassero ampi disavanzi di bilancio strutturali (quindi pro-ciclici) soprattutto a partire dai turbolenti anni Settanta. Malgrado in quel decennio gli alti tassi di inflazione (sostenuti dalla prassi che obbligava la Banca d'Italia a finanziare direttamente i disavanzi del bilancio pubblico) abbiano reso i tassi di interesse reali negativi (costituendo così un importante fattore di contenimento del rapporto debito/PIL), con l'ingresso nello SME (1979) e il cosiddetto "divorzio" tra la Banca d'Italia e il Tesoro (1981), i rendimenti reali sui titoli del debito accumulato sono diventati positivi e, superando i tassi di crescita reale del PIL, hanno provocato una vera e propria impennata del rapporto debito/PIL (che già alla fine degli anni Ottanta aveva superato il 100%). ; http://www.sieds.it/listing/RePEc/journl/2015LXIX_N3rieds_sieds.pdf