Confirmation Letter To A Friend

Entertainment Private, Public Expense (The Sultan of Swing)

(refresh : originally published July 30, 2009 , Inglese version here )

The recent controversy over private conduct of the Prime Minister have not focused sufficiently clearly an important issue that affects all citizens: the economic one. The personal stories
the Premier would result in substantial costs public. First there are the direct costs entertainment, also known: gli onorari delle prestazioni, i costi di trasporto degli invitati alle feste e così via. A questi vanno sommate, se venissero accertate dall’ inchiesta pugliese, le somme elargite a mo’ di compenso agli imprenditori della sanità coinvolti.

Più importanti sono però i costi di reputazione . Quando il comportamento privato di chi ha responsabilità istituzionali contraddice valori pubblicamente professati, e perciò viola il patto di fiducia con i cittadini, il prestigio delle istituzioni viene appannato (come insegna l’esperienza del caso Clinton - Lewinsky). In tempi di crisi, tale discredito può incidere in modo molto negativo sulla coesione nazionale ( perché dovrei accettare sacrifices when the Premier made merry? ), and exacerbate the conflict and the social costs of recession. In addition, it can undermine the 'authority of the country in international fora, inhibiting defend the economic, strategic and military of the nation. The economic consequences of that loss of prestige are likely to be high, but difficult to estimate.

There are other indirect costs of credibility, always borne by the taxpayers, potentially very large. In fact, if it worsens, the response from financial markets on the suitability of the Prime Minister to play its role effectively, and if for this reason any questions about the cohesion and stability of His government also deteriorates to judge the solvency of state: the result is likely to increase the interest on the debt. Since this has recently passed 1.750000000000 euro, even a modest increase would yield substantial cost to the exchequer.

But how to assess the (possible) extent of this effect, "Berlusconi-scandals" on the spreads of government bonds? In the following exercise we tried to base it on the curiosity aroused by the events of the Premier, as measured by the intensity with which, from the beginning of the year, were carried out searches on Google (1) containing some keywords: Berlusconi Naomi, Veronica Lario, Tarantini, Topolanek, Palazzo Grazioli, Villa Certosa, D'Addario, Questions Republic. Google Trends allows you to obtain such information on a weekly basis exercise took into account the fact that rates of return reflected the Italian international markets, and that they have recently experienced a strong downward trend of the essays (2).

The results of this exercise should be considered with great caution, as likely to suffer from errors in the measurement of the variable "scandal" (not all the recent searches for "Berlusconi" has to do with the scandals), the limited number of observations available (29 weekly observations, from 22/12/2008 to 07/23/2009), and the possibility of a correlation "spurious" (if, for example, students with long hair have better grades than those with short hair, not necessarily letting his hair grow it will improve the vote: the correlation is probably due to the fact that women have on average better grades than men). (3)

That said, the data suggest the existence of a relationship positive and statistically significant correlation between the weekly returns of government debt to 10 years (on the ordinate in the graph) and the intensity of search for "Berlusconi" (on axis).

Taken literally, the estimates suggest that if the increase in interest rates due to the recent curiosity about the Prime Minister should extend to the maturity structure and thus affect the 'stock of debt outstanding, the 'additional burden (5) for the state budget would be at least € 593 million, just over half of the funds allocated for the reconstruction of Abruzzo in 2009.

Even with the precautions mentioned, the question arises: Can the country afford a prime minister who is likely to be so "expensive"?

Publisher noisefromamerika
Notes July 31, 2009.
(1) has been recently used Google Insights for example, by Hal Varian and Hyunyoung Choi (2009), "Predicting The Present with Google Trends "
(2) In the return on bonds is explained by the Italians' progress German and American interest rates (10 YR Benchmark Bonds - Redemption yields, Source: Datastream) from the lagged value of the Italian performance, a linear trend, and the Google Trends delayed by a variable period (week). I thank Giulio Trigilia, University of Bologna, for the availability of data.
(3) For a detailed analysis del'analisi regression, which allows you to reasonably exclude that the relationship is affected by "outliers" and represents a spurious report, see here . The data set is available here .
(4) The other keywords (Noemi, Villa Certosa, Tarantini, Topolanek, Palazzo Grazioli, Veronica Lario) are not significant however. Google Trends does not have sufficient observations and questions for D''Addario Republic.
(5) To assess the burden on public finances have calculated the difference between the average of the research on Berlusconi in the last 15 weeks than the average since the beginning of the year = [DELTA Berlusconi] = [mean berlusc(t>14) – media berlusc] = [1.698889-1.104095], e ho poi applicato il coefficiente più piccolo dell’intervallo di confidenza del parametro della variabile Berlusconi: emin = .0006077 . Quindi la stima effetto minimo di impatto è = emin x [DELTA Berlusconi] x debito = .0006077 *[media berlusc(t>14) – media berlusc]* 1750bill = .0006077 * [1.698889-1.104095] * 1750 miliardi= 593 milioni