The Italian National Accounts were substantially revised in 1985 and official estimates released since then only cover the years since 1970 for most of the variables of interest in a study on saving. As part of the project that has led to this volume, a major reconstruction of the data has been undertaken. Analytical income accounts from 1970 onwards and aggregate time series since 1951 have been constructed by Giuseppe Marotta and Patrizia Pagliano and by Patrizia Pagliano and Nicola Rossi in the two essays published in “Income and Saving in Italy: A Reconstruction”, Temi di discussione 169, Banca d'Italia, June 1992.

These data have been used in the time series estimates presented in Chapter 2 of this book and, after being updated to match the new release of official statistics by Istat, to produce the income and consumption flows, general government accounts, wealth measures and saving rates presented in the tables which follow. Social security wealth has been estimated by Luca Beltrametti; for the methodology followed see Appendix B to the working paper version of Chapter 2 (N. Rossi and I. Visco, “Private Saving and Government Deficit in Italy (1951–1990)”, Temi di discussione 178, Banca d'Italia, October 1992).

Introduction

Recent research on the evolution of the Italian saving rate has suggested that capital market imperfections are among the probable explanations for the high rate of saving in Italy. Reasonable as it is, the borrowing constraints hypothesis can only be accepted or rejected on empirical grounds. In the case of Italy, Jappelli and Pagano (1988), Guiso and Jappelli (1994) and Guiso, Jappelli and Terlizzese (1994) have attempted to evaluate the impact of capital market imperfections on households' saving decisions and have substantiated their claims by means of a number of empirical tests designed to assess the effect of credit market imperfections on the saving behavior of Italian households.

Their work relies crucially on exogenously given criteria to identify liquidity–constrained consumers. For example, in Jappelli and Pagano (1988), the sample selection rule (i.e. the arbitrary threshold above which liquidity constraints are supposed to operate) coincides with a propensity to save below 15 percent. Alternatively, they rely (along with Guiso and Jappelli, 1994) on direct information (available in the Bank of Italy Survey of Household Income and Wealth, SHIW) regarding consumers turned down (or expecting to be turned down) in the market for consumer credit. Finally, to assess the impact of mortgage market imperfections Guiso et al. (1994) assume that homeowners are not constrained in the mortgage market.

Introduction

According to official sources, aggregate Italian saving rates have declined substantially in recent years. The precise timing and extent of this change largely depend on the definition of saving adopted and on the researcher's attitude toward the host of measurement issues involved. However, major trends are undisputably under way with regard to gross and net rates, national and private measures and “adjusted” and “unadjusted” values, and provide a rather surprising description of the behavior of Italian consumers.

In the second half of the eighties private saving rates (net of depreciation, adjusted for durables and inflation and computed as ratios to net national disposable income) fluctuated around 14 percent, 5 percentage points lower than the average in the sixties. In the same years government saving (adjusted for inflation) plunged to an unprecedented minus 1 percent, after more than thirty years of current account surpluses averaging 3 percent. As a result, the overall Italian saving rate is 9 percentage points lower today than during the so–called “Italian economic miracle”.

Several alternative explanations for the fall in the saving rate have been put forward in recent research. In particular, the impact of fiscal policy on private sector behavior has been repeatedly scrutinized, although no definite conclusion has been drawn. Nevertheless, this paper proposes that a thorough assessment of the interplay of private and public decisions can shed light on the evolution of the saving rate in recent decades.

Starting in the period between 1970 and 1975, most OECD member countries saw a more or less marked decline in national and personal saving rates. In Italy, the net private saving rate adjusted for inflation and including net investment in consumer durables hovered around 19 percent during the sixties, declined in the seventies and early eighties and has fluctuated around 14 percent since then. This makes the level of the Italian saving rate generally higher than the average for OECD countries throughout this period, but the size of the decline is also greater for Italy than for other countries.

These patterns have given rise to concern about the ability of the economies to accommodate a sufficiently rapid capital accumulation. An increase in the rate of capital accumulation on a global level has been viewed as necessary in order to meet the financial needs of many developing regions, including Eastern Europe, which are to be set on a stable path of economic recovery and development. A reversal of the declining trend of investment in the developed economies has also been called for in order to meet the capital requirements needed to enhance the economic and social welfare and to sustain the rates of growth necessary to reduce the high levels of unemployment, which have prevailed, especially in the European Community, in the last fifteen years (for a most recent contribution on some of these issues, see the collection of papers in Heertje, 1993).

Marcello De Cecco tells a good story very well. There is no model, nor any underlying thesis, so a discussant cannot do much more than either add to the story or indicate that he profited from it, as I did. It might be seen as a religious tale of vice and virtue – it is basically Christian, culminating in a conversion, but the Rothschilds did get a share of the action, though they did not of course ever convert. They got shut out of the 1902 operation by the hapless Di Broglio, and they then procrastinated in 1906 and ultimately played only a minor role. Their main fee appears to have gone to paying to advertise the operation.

The new Kingdom of Italy started with heavy fiscal pressure and a ‘huge’ debt – 95% of GDP, rising to 115% fifteen years later, and peaking at 120% in 1895. These figures exceed even those which are causing so much concern today and may indeed make us wonder whether that concern is exaggerated. According to De Cecco, foreign debt was ‘the bane of Italian political and economic authorities’. He should perhaps tell us why they found it such a burden; after all, they did not hesitate to borrow more abroad in the 1880s.

The paper tells an interesting story about capital flight, the repatriation of bonds, and the effect on the exchange rate. The ‘repurchases’ here are not buybacks by the state, but rather repatriation by private residents.