Macroeconomics: Economic Performance Indicators of Italy
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This study analyzes the economic performance indicators of Italy, including GDP growth, public debt, inflation rate, interest rates, current account balance, exchange rate trends, and unemployment rates. It evaluates the impact of the 2007-2008 Global Financial Crisis on the country's economy and assesses the economic policies implemented by the government. The study also describes and evaluates changes in key economic performance indicators and assesses overall economic performance.
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Running head: Macroeconomics
MACROECONOMICS
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MACROECONOMICS
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1
Macroeconomics
Table of Contents
Introduction......................................................................................................................................2
Part A: Economic performance indicators (EPI).............................................................................3
Growth in Real Gross Domestic Product.........................................................................................3
b. Public debt as a percentage of GDP............................................................................................4
c. Rate of inflation...........................................................................................................................5
d. Interest rates.................................................................................................................................6
e. Current account surplus/deficit as a percent of GDP...................................................................7
f. Exchange rate trends....................................................................................................................8
g. Unemployment rates....................................................................................................................9
1. An evaluation of how the 2007-2008 Global Financial Crises (GFC) affected the country’s
economy.........................................................................................................................................10
2. Assessment of the economic policies that has been implemented by government...................11
3. Description and evaluates changes in key economic performance indicators...........................12
4. Assessment of economic performances indicator......................................................................16
Conclusion.....................................................................................................................................17
Macroeconomics
Table of Contents
Introduction......................................................................................................................................2
Part A: Economic performance indicators (EPI).............................................................................3
Growth in Real Gross Domestic Product.........................................................................................3
b. Public debt as a percentage of GDP............................................................................................4
c. Rate of inflation...........................................................................................................................5
d. Interest rates.................................................................................................................................6
e. Current account surplus/deficit as a percent of GDP...................................................................7
f. Exchange rate trends....................................................................................................................8
g. Unemployment rates....................................................................................................................9
1. An evaluation of how the 2007-2008 Global Financial Crises (GFC) affected the country’s
economy.........................................................................................................................................10
2. Assessment of the economic policies that has been implemented by government...................11
3. Description and evaluates changes in key economic performance indicators...........................12
4. Assessment of economic performances indicator......................................................................16
Conclusion.....................................................................................................................................17
2
Macroeconomics
Introduction
The study is going to identify the economic performances indicator of Italy for 12 years.
The economic performances indicators of Italy will include the factors like growth in real
domestic product, public debt as percentage of GDP, rate of inflation, rate of interest, current
account surplus or deficit as percentage of GDP, exchange rate trends and unemployment rate.
Through the analysis of the economic performances indicators of Italy, the overall scenario of
the country will be clear and decisions regarding investment can be easily made. Deep analysis
of this decision will automatically increase the overall efficiency of Italy regarding the
improvement in trade and commerce. The deep analysis will automatically increase the
development of various government regulations that will help Italy in doing the better trade and
commerce. Through the development of the economic analysis, the improvement in the policy is
also closely linked with growth in EPI.
Macroeconomics
Introduction
The study is going to identify the economic performances indicator of Italy for 12 years.
The economic performances indicators of Italy will include the factors like growth in real
domestic product, public debt as percentage of GDP, rate of inflation, rate of interest, current
account surplus or deficit as percentage of GDP, exchange rate trends and unemployment rate.
Through the analysis of the economic performances indicators of Italy, the overall scenario of
the country will be clear and decisions regarding investment can be easily made. Deep analysis
of this decision will automatically increase the overall efficiency of Italy regarding the
improvement in trade and commerce. The deep analysis will automatically increase the
development of various government regulations that will help Italy in doing the better trade and
commerce. Through the development of the economic analysis, the improvement in the policy is
also closely linked with growth in EPI.
3
Macroeconomics
Part A: Economic performance indicators (EPI)
Economic performance indicators will be helpful for the development of fiscal and
monetary policies that will not only increase the development of economy but will also increase
the development of trade and commerce.
Growth in Real Gross Domestic Product
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
-6
-5
-4
-3
-2
-1
0
1
2
3
Real GDP of Italy
Values
Figure 1: Real GDP of Italy
(Source: Data.worldbank.org, 2019)
The above diagram is showing the fact that real GDP has shown an upward trend until
2007 and after that it started to fall deeply in 2009 and again started to increase. This may be the
reason due to the global financial crisis in 2008-2009. However, the improvement in the real
GDP will develop the growth of economy. Now the economy of Italy is growing in the sense that
in the European counterpart the Italian economy is having huge potentiality in the economic
Macroeconomics
Part A: Economic performance indicators (EPI)
Economic performance indicators will be helpful for the development of fiscal and
monetary policies that will not only increase the development of economy but will also increase
the development of trade and commerce.
Growth in Real Gross Domestic Product
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
-6
-5
-4
-3
-2
-1
0
1
2
3
Real GDP of Italy
Values
Figure 1: Real GDP of Italy
(Source: Data.worldbank.org, 2019)
The above diagram is showing the fact that real GDP has shown an upward trend until
2007 and after that it started to fall deeply in 2009 and again started to increase. This may be the
reason due to the global financial crisis in 2008-2009. However, the improvement in the real
GDP will develop the growth of economy. Now the economy of Italy is growing in the sense that
in the European counterpart the Italian economy is having huge potentiality in the economic
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4
Macroeconomics
performances indicators. The performances of Euro are highly significant behind the stagnant
growth of the economy of Italy. Introduction of Euro has led to the lowering of real interest rates
that has a deep impact on the productivity of Italy. Many economists have also claimed that
presence of tight monetary policy within the economy is also responsible for the stagnating
growth of Italian economy (Papadia, 2019).
b. Public debt as a percentage of GDP
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
0
20
40
60
80
100
120
140
public debt as % of GDP in Italy
values
Figure 2: Public debt as percentage of GDP in Italy
(Source: Ceicdata.com, 2019)
Macroeconomics
performances indicators. The performances of Euro are highly significant behind the stagnant
growth of the economy of Italy. Introduction of Euro has led to the lowering of real interest rates
that has a deep impact on the productivity of Italy. Many economists have also claimed that
presence of tight monetary policy within the economy is also responsible for the stagnating
growth of Italian economy (Papadia, 2019).
b. Public debt as a percentage of GDP
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
0
20
40
60
80
100
120
140
public debt as % of GDP in Italy
values
Figure 2: Public debt as percentage of GDP in Italy
(Source: Ceicdata.com, 2019)
5
Macroeconomics
The High growth of public debt as percentage of GDP in Italy is increasing and this is not
at all good scenario for a developing nation like Italy. This is because, the government incurs the
public debt and increasing amount of public demand is actually going to incorporate pressure on
the development of the economy of Italy. Through the increase in the public debt, the economy
will not be able to increase production, as huge increased level of public debt will put pressure
on the current account balance of Italy. Due to increased amount of the public debt within the
economy, the government of Italy has faced huge deficit primarily in order to finance large
investments projects that were mainly designed for the welfare of state. On the other hand, long-
term bonds whose maturity has been over by 1 year mainly compose 75% of the government
debt. Some particular banks and insurance companies are holding almost 75% of the government
debts that are being hold by residents (Focus Economics, 2019). Even the performances of
domestic banks and financial institutions played a significant role during the Euro crisis.
c. Rate of inflation
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
0
0.5
1
1.5
2
2.5
3
inflation rate of Italy
Percentage of GDP
Macroeconomics
The High growth of public debt as percentage of GDP in Italy is increasing and this is not
at all good scenario for a developing nation like Italy. This is because, the government incurs the
public debt and increasing amount of public demand is actually going to incorporate pressure on
the development of the economy of Italy. Through the increase in the public debt, the economy
will not be able to increase production, as huge increased level of public debt will put pressure
on the current account balance of Italy. Due to increased amount of the public debt within the
economy, the government of Italy has faced huge deficit primarily in order to finance large
investments projects that were mainly designed for the welfare of state. On the other hand, long-
term bonds whose maturity has been over by 1 year mainly compose 75% of the government
debt. Some particular banks and insurance companies are holding almost 75% of the government
debts that are being hold by residents (Focus Economics, 2019). Even the performances of
domestic banks and financial institutions played a significant role during the Euro crisis.
c. Rate of inflation
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
0
0.5
1
1.5
2
2.5
3
inflation rate of Italy
Percentage of GDP
6
Macroeconomics
Figure 3: Rate of Inflation in Italy
(Source: Data.worldbank.org, 2019)
The rate of inflation rate in Italy has witnessed deep fall in the year 2010 and before that
economy was having high rate of inflation growth to 2008 from 2006. After the great financial
crisis, the inflation rate is showing decreasing trend in growth of the inflation rate. The high rise
of the inflation rate is not a good sign for the economy, as the rate of high inflation will
obviously erode away the purchasing power of the money of the consumer. Previously Italy was
experiencing deflation within their economy and the economy had made a sharp rebound in the
inflation rate and started to increase their efficiency in the consumer price. The energy price
within the country witnessed a jump of about 5.7% in their basket price and about 3.3% rise in
the transport cost and witnessed a jump of 1.8% in the price of goods (Financial Times, 2019).
d. Interest rates
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Interest rate of Italy
Interest rate of Italy
Figure 4: Interest rate of Italy
Macroeconomics
Figure 3: Rate of Inflation in Italy
(Source: Data.worldbank.org, 2019)
The rate of inflation rate in Italy has witnessed deep fall in the year 2010 and before that
economy was having high rate of inflation growth to 2008 from 2006. After the great financial
crisis, the inflation rate is showing decreasing trend in growth of the inflation rate. The high rise
of the inflation rate is not a good sign for the economy, as the rate of high inflation will
obviously erode away the purchasing power of the money of the consumer. Previously Italy was
experiencing deflation within their economy and the economy had made a sharp rebound in the
inflation rate and started to increase their efficiency in the consumer price. The energy price
within the country witnessed a jump of about 5.7% in their basket price and about 3.3% rise in
the transport cost and witnessed a jump of 1.8% in the price of goods (Financial Times, 2019).
d. Interest rates
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Interest rate of Italy
Interest rate of Italy
Figure 4: Interest rate of Italy
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7
Macroeconomics
(Source: Data.worldbank.org, 2019)
The rate of interest is also showing similar pattern of growth like inflation rate. The
growth in the interest rate is going to decrease the loan able ability of the economy. The interest
rate is rebounded by 6.6% in Italy is going to increase the ability of the loans within the economy
(Voxeu.org, 2019). The rate of interest is facing a stagnant growth from the year 2012-2015. The
development of the interest rate in Italy is important in the sense that with the increased rate of
interest rate the demand of the loans will decrease that will decrease the economic growth of the
development of Italy. This is important in the sense that through the development of the
economy Italy is going to increase the investment that will increase the situation in the
economy.
e. Current account surplus/deficit as a percent of GDP
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
-4
-3
-2
-1
0
1
2
3
4
Current account balance of Italy
Current account balance of Italy
Figure 5: Current account balance of Italy
(Source: Data.worldbank.org, 2019)
Macroeconomics
(Source: Data.worldbank.org, 2019)
The rate of interest is also showing similar pattern of growth like inflation rate. The
growth in the interest rate is going to decrease the loan able ability of the economy. The interest
rate is rebounded by 6.6% in Italy is going to increase the ability of the loans within the economy
(Voxeu.org, 2019). The rate of interest is facing a stagnant growth from the year 2012-2015. The
development of the interest rate in Italy is important in the sense that with the increased rate of
interest rate the demand of the loans will decrease that will decrease the economic growth of the
development of Italy. This is important in the sense that through the development of the
economy Italy is going to increase the investment that will increase the situation in the
economy.
e. Current account surplus/deficit as a percent of GDP
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
-4
-3
-2
-1
0
1
2
3
4
Current account balance of Italy
Current account balance of Italy
Figure 5: Current account balance of Italy
(Source: Data.worldbank.org, 2019)
8
Macroeconomics
The current account is showing huge rate of deficiency until the year 2012 and after that
the economy has been seen an upsurge in their current account balance. Economy of Italy has
witnessed 40% increase in the unit labour cost compared to Germany and it happened mainly
due to the tight monetary policy and strong incorporation of the labour unions. The divergence in
the economy has decreased steadily in manufacturing units and the service sectors are the main
reasons behind the high growth of economic variables and through the development of trade and
commerce, Italian economy witnessed surplus in the current account balance and the amount of
€47bn was the largest among the whole European unions. Seven years ago the Italian economy
witnessed current account deficit of €45-50bn and after that government spending increased by
huge margin (Financial Times, 2019). Through the development of the resource utilization,
economy is going to help in increasing the government spending.
f. Exchange rate trends
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
88
90
92
94
96
98
100
102
104
106
Real effective exchange rate
Real effective exchange rate
Figure 6: Real Exchange rate of Italy
(Source: Data.worldbank.org, 2019)
Macroeconomics
The current account is showing huge rate of deficiency until the year 2012 and after that
the economy has been seen an upsurge in their current account balance. Economy of Italy has
witnessed 40% increase in the unit labour cost compared to Germany and it happened mainly
due to the tight monetary policy and strong incorporation of the labour unions. The divergence in
the economy has decreased steadily in manufacturing units and the service sectors are the main
reasons behind the high growth of economic variables and through the development of trade and
commerce, Italian economy witnessed surplus in the current account balance and the amount of
€47bn was the largest among the whole European unions. Seven years ago the Italian economy
witnessed current account deficit of €45-50bn and after that government spending increased by
huge margin (Financial Times, 2019). Through the development of the resource utilization,
economy is going to help in increasing the government spending.
f. Exchange rate trends
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
88
90
92
94
96
98
100
102
104
106
Real effective exchange rate
Real effective exchange rate
Figure 6: Real Exchange rate of Italy
(Source: Data.worldbank.org, 2019)
9
Macroeconomics
The real exchange rate is not having that level of performances throughout the period of
2005-2017. The development of Libra and other currency is one of the important aspects in the
sense that the real exchange rate is going to increase the improvement of flow of the currency
and it will order the development of the economy will increase the resource utilization. On the
other hand, through the innovation in real exchange rate will determine the improvement in the
economy (Fuchs-Schündeln & Hassan, 2016).
g. Unemployment rates
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
0
2
4
6
8
10
12
14
Unemployment rate
Unemployment rate
Figure 7: Unemployment rate
(Source: Data.worldbank.org, 2019)
The unemployment rate within the economy of Italy is increasing and it is one of the
important senses that it will increase the pressure on the economy of Italy. Increase in the level
of unemployment rate is going to increase the development of less GDP in the economy and will
definitely increase the pressure on the government regarding the fiscal policy that has been
prevailing in the economy.
Macroeconomics
The real exchange rate is not having that level of performances throughout the period of
2005-2017. The development of Libra and other currency is one of the important aspects in the
sense that the real exchange rate is going to increase the improvement of flow of the currency
and it will order the development of the economy will increase the resource utilization. On the
other hand, through the innovation in real exchange rate will determine the improvement in the
economy (Fuchs-Schündeln & Hassan, 2016).
g. Unemployment rates
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
0
2
4
6
8
10
12
14
Unemployment rate
Unemployment rate
Figure 7: Unemployment rate
(Source: Data.worldbank.org, 2019)
The unemployment rate within the economy of Italy is increasing and it is one of the
important senses that it will increase the pressure on the economy of Italy. Increase in the level
of unemployment rate is going to increase the development of less GDP in the economy and will
definitely increase the pressure on the government regarding the fiscal policy that has been
prevailing in the economy.
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10
Macroeconomics
Part B Report on Macroeconomic stability and policy
1. An evaluation of how the 2007-2008 Global Financial Crises (GFC) affected the
country’s economy
In 2008, before the collapse of Prod’s government led to the development of Berlusconi
and the Right regained power and they are aiming to increase the policies that have been taken
by the government and during that time, global economic crisis was just kicking in. The
government is aiming to increase the austerity and stability within the economy and the situation
that was prevailing within the economy was not suitable for coalition. Since 1990, the left
government supported the view of the reducing public debt and budget deficit so that they can
solve the problems that are related with the tax and tax evasion (Gla.ac.uk, 2019). The economic
crisis that was growing in 2008 has damaged the hope for the economic growth in the subsequent
years.
In the first decade of new millennium coalitions of both left and right government, was
not able to solve the problems that were popping up in the economy in the end. The economy of
Italy was making the growth of their economy stagnant in nature. Employment policies that had
been taken by the government mainly highlight the results that were in previous era. The
economy of Italy was witnessing low wage and restrictions in the rights of workers and it has
been seen mainly among young professionals (Gla.ac.uk, 2019). Long-term family investment
decreased in the economy and that made decision of building house slower and forced the
employees of the economy to refrain them from doing marriage and child bearing. Not only the
economy was having low quality of standard of living but the quality of education was also
degrading due to cut in tax and many unsuccessful reforms were mainly responsible for this.
Macroeconomics
Part B Report on Macroeconomic stability and policy
1. An evaluation of how the 2007-2008 Global Financial Crises (GFC) affected the
country’s economy
In 2008, before the collapse of Prod’s government led to the development of Berlusconi
and the Right regained power and they are aiming to increase the policies that have been taken
by the government and during that time, global economic crisis was just kicking in. The
government is aiming to increase the austerity and stability within the economy and the situation
that was prevailing within the economy was not suitable for coalition. Since 1990, the left
government supported the view of the reducing public debt and budget deficit so that they can
solve the problems that are related with the tax and tax evasion (Gla.ac.uk, 2019). The economic
crisis that was growing in 2008 has damaged the hope for the economic growth in the subsequent
years.
In the first decade of new millennium coalitions of both left and right government, was
not able to solve the problems that were popping up in the economy in the end. The economy of
Italy was making the growth of their economy stagnant in nature. Employment policies that had
been taken by the government mainly highlight the results that were in previous era. The
economy of Italy was witnessing low wage and restrictions in the rights of workers and it has
been seen mainly among young professionals (Gla.ac.uk, 2019). Long-term family investment
decreased in the economy and that made decision of building house slower and forced the
employees of the economy to refrain them from doing marriage and child bearing. Not only the
economy was having low quality of standard of living but the quality of education was also
degrading due to cut in tax and many unsuccessful reforms were mainly responsible for this.
11
Macroeconomics
During the period of 2008, Lehman Brother collapsed and it brought a contraction in the
interbank loan market. Most of the banks refused to give loans to each other due to lack of
liquidity and uncertainty in the financial conditions of borrowers. The Liquidity crisis forced the
government to support national banks with loans and on the other hand, European Central Banks
cut the discount rate (Gla.ac.uk, 2019). On the other hand, the banks also made a restriction in
the availability of credit to clients to regain the liquidity within the economy. Another factor that
popped up during this crisis is that in Italy there are many small and medium sized banks are
operating on regional scale and this is important in the sense that few of the large banks were out
of cash mainly due to collapse of Lehman Brother and their assets were devalued by the collapse
of stock market. The economy stopped offering full time payment for jobs during the period of
2008-2009. Decrease in the economic activities reduced the tax revenue and increased the anti-
crisis policies and expenditure.
2. Assessment of the economic policies that has been implemented by government
Tackling the economic crisis by taking effective policies will automatically increase the
development and different governments take different policies. However, in Italy, Berlusconi’s
government dealt with the economic crisis in two main ways. One of the ways was supporting
the large firms, business house, and the second way that has been taken by the government is
cutting public spending (Gla.ac.uk, 2019). Support of the government for the big firms will help
in the development of employment retention programe that will benefit the big firms to increase
their employment rates. Cutting public spending instead of increase in tax has been proven
successful in avoiding negative impact on the investment and consumers expenditure.
On the other hand, cuts in tax is not being able to be distributed among the different
social groups and the government mainly focused on the development of public sectors and
Macroeconomics
During the period of 2008, Lehman Brother collapsed and it brought a contraction in the
interbank loan market. Most of the banks refused to give loans to each other due to lack of
liquidity and uncertainty in the financial conditions of borrowers. The Liquidity crisis forced the
government to support national banks with loans and on the other hand, European Central Banks
cut the discount rate (Gla.ac.uk, 2019). On the other hand, the banks also made a restriction in
the availability of credit to clients to regain the liquidity within the economy. Another factor that
popped up during this crisis is that in Italy there are many small and medium sized banks are
operating on regional scale and this is important in the sense that few of the large banks were out
of cash mainly due to collapse of Lehman Brother and their assets were devalued by the collapse
of stock market. The economy stopped offering full time payment for jobs during the period of
2008-2009. Decrease in the economic activities reduced the tax revenue and increased the anti-
crisis policies and expenditure.
2. Assessment of the economic policies that has been implemented by government
Tackling the economic crisis by taking effective policies will automatically increase the
development and different governments take different policies. However, in Italy, Berlusconi’s
government dealt with the economic crisis in two main ways. One of the ways was supporting
the large firms, business house, and the second way that has been taken by the government is
cutting public spending (Gla.ac.uk, 2019). Support of the government for the big firms will help
in the development of employment retention programe that will benefit the big firms to increase
their employment rates. Cutting public spending instead of increase in tax has been proven
successful in avoiding negative impact on the investment and consumers expenditure.
On the other hand, cuts in tax is not being able to be distributed among the different
social groups and the government mainly focused on the development of public sectors and
12
Macroeconomics
paying the employees working in public sectors. Most of the sectors in the economy of Italy
were facing consequences of spread of miss information’s regarding the policies of the
governments. Among the policies that were taken by the government did not take certain
measurements and were lacking in analysis. On the major mistake is that the government did not
take the reason for such condition seriously. The government of Italy mistook the efficiency and
meritocracy and sacrificed them to create large number of low paid jobs. The main problem that
is lying within the government is that there is huge number of public employees.
On the other hand, due to false reputation within the economy are also not forcing the
economy of Italy to attract the private investors that will not only increase the public debt but
will also stagnant the economic growth (Gla.ac.uk, 2019). Berlusconi’s industrial policy were
mainly comprised of faulty policies and one of the notable fact that has been found out regarding
the economy of Italy is that economy is mainly comprised with huge number of small and
medium sized enterprises and few firms are behaving as large firms. The SME were not getting
enough growth and their ability to create jobs was missing.
The economy of Italy was mainly creating problems in the sense that it was not sure of
using technologies to identify the gaps in the economy in creating jobs. This is important in the
sense that through the improvement in the government regulations will not only allow the
economy to bring in changes in policies but also indulge economy to highlight the importance of
the regulation and the growth of the economy.
Macroeconomics
paying the employees working in public sectors. Most of the sectors in the economy of Italy
were facing consequences of spread of miss information’s regarding the policies of the
governments. Among the policies that were taken by the government did not take certain
measurements and were lacking in analysis. On the major mistake is that the government did not
take the reason for such condition seriously. The government of Italy mistook the efficiency and
meritocracy and sacrificed them to create large number of low paid jobs. The main problem that
is lying within the government is that there is huge number of public employees.
On the other hand, due to false reputation within the economy are also not forcing the
economy of Italy to attract the private investors that will not only increase the public debt but
will also stagnant the economic growth (Gla.ac.uk, 2019). Berlusconi’s industrial policy were
mainly comprised of faulty policies and one of the notable fact that has been found out regarding
the economy of Italy is that economy is mainly comprised with huge number of small and
medium sized enterprises and few firms are behaving as large firms. The SME were not getting
enough growth and their ability to create jobs was missing.
The economy of Italy was mainly creating problems in the sense that it was not sure of
using technologies to identify the gaps in the economy in creating jobs. This is important in the
sense that through the improvement in the government regulations will not only allow the
economy to bring in changes in policies but also indulge economy to highlight the importance of
the regulation and the growth of the economy.
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13
Macroeconomics
3. Description and evaluates changes in key economic performance indicators
Changes in the key economic performances indicators are going to highlight the
development of better incorporation of business rules and regulations and will identify the
resource development policies of the economy.
Changes in Real Gross Domestic Product
The decision that the government of the Italy took by bringing back Libra is going to
increase the development of the economy. The economy was struggling heavily due to
introduction of Euro. One of the important things that have been seen is that the neutrality of
money and the basic fact claimed that in the end, if the stock of the currency increases then the
effect of doubling price level will only happen and change in real variables will not happen.
Recession within the economy is not only going to bring effects on the level of income but will
also bring an effect on rate of growth (Romer, 2016). This will have direct impact on the
employment ability of the economy as the unemployed employees will lose abilities and
competences and this will reduce the fitness of the employees. The Phillips curve will shift up
and towards the right and this will worsen the short-term unemployment.
Macroeconomics
3. Description and evaluates changes in key economic performance indicators
Changes in the key economic performances indicators are going to highlight the
development of better incorporation of business rules and regulations and will identify the
resource development policies of the economy.
Changes in Real Gross Domestic Product
The decision that the government of the Italy took by bringing back Libra is going to
increase the development of the economy. The economy was struggling heavily due to
introduction of Euro. One of the important things that have been seen is that the neutrality of
money and the basic fact claimed that in the end, if the stock of the currency increases then the
effect of doubling price level will only happen and change in real variables will not happen.
Recession within the economy is not only going to bring effects on the level of income but will
also bring an effect on rate of growth (Romer, 2016). This will have direct impact on the
employment ability of the economy as the unemployed employees will lose abilities and
competences and this will reduce the fitness of the employees. The Phillips curve will shift up
and towards the right and this will worsen the short-term unemployment.
14
Macroeconomics
Figure 8: Real growth and unemployment in Italy (1960-2016)
(Source: Papadia, 2019)
The above figure is clearly showing the fact that Italy had performed well until 2008 and
they have increased the development growth rate of the economy. However, on the other hand,
the unemployment rate was also increased and they have increased the unemployment rate more
in the pre globalization crisis compared to the post globalization crisis. Compared to the data, the
period until 2007 is claimed as stable period.
Macroeconomics
Figure 8: Real growth and unemployment in Italy (1960-2016)
(Source: Papadia, 2019)
The above figure is clearly showing the fact that Italy had performed well until 2008 and
they have increased the development growth rate of the economy. However, on the other hand,
the unemployment rate was also increased and they have increased the unemployment rate more
in the pre globalization crisis compared to the post globalization crisis. Compared to the data, the
period until 2007 is claimed as stable period.
15
Macroeconomics
Figure 9: Comparison in economic factors for Countries like Italy, Spain, Germany and
France
(Source: Papadia, 2019)
The economy of Italy has faced huge fall in the real exchange rate. During the period of
1985-1998, the economy witnessed 6.58% and in the period of great recession, the economy
witnessed interest rate of 3.44 that is more than the countries like France and Germany and less
than Spain. Even the TFP is growing but the unemployment in all the countries except Germany
has increased (Papadia, 2019). Only Germany maintained sustainable employment. Even the
current account balance was showing deficit that started to improve the trade deficit. This is one
of the important aspects in the sense that through the development in the economy, the policies
Macroeconomics
Figure 9: Comparison in economic factors for Countries like Italy, Spain, Germany and
France
(Source: Papadia, 2019)
The economy of Italy has faced huge fall in the real exchange rate. During the period of
1985-1998, the economy witnessed 6.58% and in the period of great recession, the economy
witnessed interest rate of 3.44 that is more than the countries like France and Germany and less
than Spain. Even the TFP is growing but the unemployment in all the countries except Germany
has increased (Papadia, 2019). Only Germany maintained sustainable employment. Even the
current account balance was showing deficit that started to improve the trade deficit. This is one
of the important aspects in the sense that through the development in the economy, the policies
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16
Macroeconomics
will also play a significant role in improving the overall situation. After the crisis of 2008-2009,
the debt reduction structure was reversed and in order to indulge the development of resources
within the economy, the public debt is highly significant (Stiglitz, 2018).
4. Assessment of economic performances indicator
It has been seen that the economic performances indicators will not only develop the
economy but will also highlight the development of the resources will automatically increase the
development of the economy. This is important in the sense that it will definitely increase the
importance of the development of better technology that will not only increase the development
of economy but will also highlight the development of better resource development and will
equally built up cooperation among the stakeholders and will highlight the development of the
economy. Through the development of resource distribution and the government investment will
definitely increase the development of revenue growth through making an increase in the current
account balance. On the contrary using more stable positions will increase the benefit to the
economy in a significant matter. However, in Italy, lack of government policies and government
investment was creating problems within the economy. On the other hand, aiming to increase the
correlation will definitely increase the amount of strong observation regarding the things that are
happening in economy.
Macroeconomics
will also play a significant role in improving the overall situation. After the crisis of 2008-2009,
the debt reduction structure was reversed and in order to indulge the development of resources
within the economy, the public debt is highly significant (Stiglitz, 2018).
4. Assessment of economic performances indicator
It has been seen that the economic performances indicators will not only develop the
economy but will also highlight the development of the resources will automatically increase the
development of the economy. This is important in the sense that it will definitely increase the
importance of the development of better technology that will not only increase the development
of economy but will also highlight the development of better resource development and will
equally built up cooperation among the stakeholders and will highlight the development of the
economy. Through the development of resource distribution and the government investment will
definitely increase the development of revenue growth through making an increase in the current
account balance. On the contrary using more stable positions will increase the benefit to the
economy in a significant matter. However, in Italy, lack of government policies and government
investment was creating problems within the economy. On the other hand, aiming to increase the
correlation will definitely increase the amount of strong observation regarding the things that are
happening in economy.
17
Macroeconomics
Conclusion
The whole study has concluded the fact that in order to increase the efficiency of the
economy, both the actions taken by government and private are important in the sense that
through the development of resource distribution the economic performances will increase and in
order to indulge the development of resources better policy should be implemented. On the other
hand, it has been seen that the development in the economic variable will allow the government
to increase the level of foreign direct investment and will increase involvement within the
economy. The study has shown the fact that most of important economic variables are not having
enough growth in them and they are not increasing the development within the economy.
Macroeconomics
Conclusion
The whole study has concluded the fact that in order to increase the efficiency of the
economy, both the actions taken by government and private are important in the sense that
through the development of resource distribution the economic performances will increase and in
order to indulge the development of resources better policy should be implemented. On the other
hand, it has been seen that the development in the economic variable will allow the government
to increase the level of foreign direct investment and will increase involvement within the
economy. The study has shown the fact that most of important economic variables are not having
enough growth in them and they are not increasing the development within the economy.
18
Macroeconomics
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19
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Finance, 72(6), 2381-2432.
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Perspectives, 32(3), 59-86.
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May 2019, from http://bruegel.org/2017/07/italian-economic-growth-and-the-euro/
Piazzesi, M., & Schneider, M. (2016). Housing and macroeconomics. In Handbook of
macroeconomics (Vol. 2, pp. 1547-1640). Elsevier.
Real effective exchange rate index (2010 = 100) | Data. (2019). Data.worldbank.org. Retrieved 8
May 2019, from https://data.worldbank.org/indicator/PX.REX.REER?
end=2017&locations=IT&start=2005
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