Political bases of macroeconomic adjustment : evidence from the italian experience
By: WALSH, James I
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ArticlePublisher: London : Routledge, March 1999Journal of European Public Policy 6, 1, p. 66-84Abstract: This article tests political explanations of policy adjustment to macroeconomic imbalances against the Italian experience since the late 1970s. After describing Italian governments' attempts to implement macroeconomic policy adjustment, I evaluate four possible causes of policy changes: political instability, a 'tying hands' strategy of entangling the state in international commitments, analysis of the aggregate costs of pursuing macroeconomic policies that diverge from the policies of other important states, and the preferences of domestic groups. I evaluate the utility of each explanation according to its ability to answer two empirical questions: Why was adjustment delayed in Italy until about 1988? And why has the form of macroeconomic policy adjustment-monetary or fiscal-changed over time? The evidence indicates that answering these questions requires specifying how the costs of various macroeconomic policy mixes fall on domestic groups, and then determining which of these groups have the most political influence.
This article tests political explanations of policy adjustment to macroeconomic imbalances against the Italian experience since the late 1970s. After describing Italian governments' attempts to implement macroeconomic policy adjustment, I evaluate four possible causes of policy changes: political instability, a 'tying hands' strategy of entangling the state in international commitments, analysis of the aggregate costs of pursuing macroeconomic policies that diverge from the policies of other important states, and the preferences of domestic groups. I evaluate the utility of each explanation according to its ability to answer two empirical questions: Why was adjustment delayed in Italy until about 1988? And why has the form of macroeconomic policy adjustment-monetary or fiscal-changed over time? The evidence indicates that answering these questions requires specifying how the costs of various macroeconomic policy mixes fall on domestic groups, and then determining which of these groups have the most political influence.
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