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Policy matters. The long run effects of aggregate demand and mark-up shocks on the Italian unemployment rate

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Author Info

  • Luca Gambetti

    ()

  • Barbara Pistoresi

    ()

Abstract

This paper estimates a VAR including labor productivity, real wage and unemployment rate, to identify the dynamic effects of technology, demand, and mark-up shocks, respectively, on the Italian labor market. Identification is achieved by imposing recursive restrictions on the matrix of long run multipliers. Our results show that both mark up and aggregate demand shocks permanently reduce the unemployment rate. Finally, technology shocks do not significantly affect the unemployment rate in the long run. These findings convey important policy implications: expansionary aggregate demand and deregulation policies reducing the mark up permanently decrease the Italian unemployment rate. Copyright Springer-Verlag 2004

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File URL: http://hdl.handle.net/10.1007/s00181-003-0159-3
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Bibliographic Info

Article provided by Springer in its journal Empirical Economics.

Volume (Year): 29 (2004)
Issue (Month): 2 (05)
Pages: 209-226

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Handle: RePEc:spr:empeco:v:29:y:2004:i:2:p:209-226

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Related research

Keywords: Structural VAR; Unemployment hysteresis; Aggregate demand and deregulation policies;

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Cited by:
  1. Annika Alexius & Bertil Holmlund, 2007. "Monetary Policy and Swedish Unemployment Fluctuations," CESifo Working Paper Series 2044, CESifo Group Munich.

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