Didier Darcet
27 September 2022

Beware of Italy!

Is Italy today all about politics?

In August, we developed our first econometric model about economic growth, applied to the European Union. There were two innovations:

  • The model is formed on accounting the production side of an economy – not the demand side. The conclusion demonstrates how eminently sensitive economic growth is to potential changes in the volume of primary energy. This connection is most evident in times of shortage. This is the situation we are currently in.
  • The model introduces Value-at-Risk simulation, like in finance, but for economic growth. Unlike other models that only observe central scenarios, it assigns a probability to recessionary outcomes.

This week, we provide simulations to compare Germany, France, and Italy. This letter is published together with the model in full detail for quant teams.

Beware of Italy!