Macroeconomic Instability and the Phillips Curve in Italy
AbstractThe theme of this paper is whether there was a textbook-like inflation-output tradeoff in post-WWII Italy. We estimate both standard and time-varying parameter models of the relationship between inflation and the level of real economic activity over the 1949 to 2010 period and find no evidence of a stable, significant and positive association between output and prices. We attribute this evidence primarily to a fiscally dominated monetary policy and a rigid indexation mechanism aimed at protecting wages from inflation. These two institutions contributed to the persistent inflation bias and macroeconomic instability that lasted almost until the entry of the country in the European Monetary Union.
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Bibliographic InfoArticle provided by Società editrice il Mulino in its journal Economia politica.
Volume (Year): (2012)
Issue (Month): 1 ()
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J.E.L.: E31; E32; J50; N10;
Other versions of this item:
- Alessandra Del Boca & Michele Fratianni & Franco Spinelli & Carmine Trecroci, 2010. "Macroeconomic instability and the Phillips curve in Italy," Working Papers 1013, University of Brescia, Department of Economics.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
- N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
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