Small‐system modelling of real wages, inflation, unemployment and output per capita in Italy 1970–1994

Abstract

The relationships between real wages, output per capita, inÀation and unemployment in Italy between 1970 and 1994, are modelled using a cointegrated vector autoregression. There is evidence of a change in the underlying equilibria and in the dynamic evolution of the variables, probably associated with the substantial changes in many sectors of the Italian economy after 1979. Alternative ways to model structural change in the Italian labour market are considered. In adopting a split sample approach the results favour an hysteresis interpretation of unemployment.JEL classi¿cation: C32, C50, E24, E37.

Econometric inflation targeting

“…The first equation says that in the steady state, labour's share of output is a function of unemployment. This is a common finding in empirical studies of wage-price dynamics-see for example Bårdsen and Fisher (1999), Mizon (1995), and Marcellino and Mizon (2001). Note that the equation also obeys the standard wage curve 'law' of Blanchflower and Oswald (1994), in that the unemployment elasticity of pay is −0.1.…”

A Univariate Analysis of Unemployment and Inflation in Italy: A Fractionally Integrated Approach

“…In this article we have examined the univariate behaviour of the unemployment and inflation rates in Italy by means of fractionally integrated techniques. We used the same dataset as in Marcelino and Mizon (2001) , i.e., seasonally (quarterly) adjusted data for the time period 1970-1994. For this purpose, we have used a version of the tests of Robinson (1994a) that permits us to test unit and fractional roots in raw time series.…”

“…Finally, and following Marcelino and Mizon (2001) , we divide the sample into two subsamples corresponding to the time periods 1970-1979 and 1980-1994. They choose this period in view of the political and economic changes that occurred in that year which make the data have different characteristics pre-and post-1980. In that paper, they still argue that both series in both subsamples may be well characterized in terms of unit roots.…”

“…The macroeconomic liter ature stresses the cases of d = 0 and d = 1. In particular, unem ployment and inflation are two variables that have been generally assumed to be 1(1) and thus, inference based on cointegration has been developed to explain the dynamic behaviour of the series (e.g., Barsky, 1987;Rose, 1988;Ball and Cecchetti, 1990;Carruth et al , 1998;Marcelino and Mizon, 2001;etc. ).…”

Natural Disasters, Growth and Institutions: A Tale of Two Earthquakes

“…As far as the Friuli case is concerned, we have not been able to find in the local economic history any significant event that might explain the divergent trend in the GDP (compared to the synthetic control) since the second half of the 1980s. however, one might argue that the Friuli-Venezia Giulia is a small and export-oriented region and, consequently, may have benefited from the competitive devaluation that occurred in Italy at the beginning of the 1990s (see Marcellino and Mizon, 2001). Therefore, we check the robustness of our result by restricting the sample of donors to regions with a relatively similar degree of trade openness.…”