The use of swaps by Italian local administrations in 2007–2014

What is it about?

Interest rate swaps have been extensively used by European governments and local administrations since the ‘90s to manage their growing debts and related costs but access to data is very limited. This study creates the first database on swaps purchased by Italian regions to investigate their impact on the debt. Results show that regions with higher debt exhibited a higher interest rate exposure and have employed derivatives hoping to counterbalance the reduced resources received from the central state, in line with other European countries’ experience (i.e., France and Greece). Italian regions heavily depended on long-term debt to finance their non-healthcare services, rather than current revenues; swaps have been used to finance discretionary (non-healthcare) debt.

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Photo by Jonathan Bean on Unsplash

Photo by Jonathan Bean on Unsplash

Why is it important?

This study creates the first database on swaps purchased by Italian regions to investigate their impact on the debt; Italy has a large public debt, and local administrations contributed to its growth; transparency was too small and accounting was inadequate.