Sorci, Pietro, "Dealing with Public Debt Burden: A System Dynamics Approach to Implement Sustainable Financial Policies in the Italian State", 2012 July 22-2012 July 26

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In the last decades in several mature democracies the problem of debt emerged as a violation of intergenerational equal treatment due to high expenditures concentration and dilution of costs by mean of debt creation. So far this issue has been analyzed from a statistical and a socio-economic perspective, which identified the high political interference as the main dysfunction of country debt management. There are no studies which frame the issue by focusing on State institutions as performance-oriented organizations, according to this perspective such organizations have to respect dynamically trade-off between development and the debt reduction through a mix of levers such as: funds acquisition/reduction, interest rate and financial leverage. System dynamics can be successfully used as an instrument to support Government in keeping control over the key variables affecting debt changes and implementing a sustainable policy. In the paper three kinds of policies are recommended: the reduction of expenses and increase of receipts in the short term to drastically reduce the debt amount; the opportunity to exploit the financial leverage in the long term. Such approach implies a change of perspective, looking at Italy as a performance-oriented organization in which a proper financial management serves economic development and not vice versa.

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  • 2012 July 22-2012 July 26
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