The Balassa-Samuelson effect and the wage, price and unemployment dynamics in Spain
AbstractThis paper provides an empirical investigation of the wage, price and unemployment dynamics that have taken place in Spain during the last two decades. The aim of this paper is to shed some light on the impact of the European economic integration process on Spanish labour market and the convergence to a European level of prosperity. We find some important lessons to be learnt from the Spanish experience that should be relevant for the new member states. First, high competitiveness in the tradable sector seems crucial for the real and nominal convergence to be successful, implying that the increase of wages in the tradable sector, and subsequently in the nontradable sector, should not be allowed to exceed the growth in productivity. Second, before fixing the real exchange rate it seems crucial that it is on its sustainable (competitive) purchasing power parity level. A real appreciation, as a result of high growth rates during the catching-up period, is likely to be harmful for real growth and employment.
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Bibliographic InfoPaper provided by Asociación Española de Economía y Finanzas Internacionales in its series Working Papers with number 05-13.
Length: 31 pages
Date of creation: Oct 2005
Date of revision:
Balassa-Samuelson effect; noninal and real convergence; unemployment dynamics; purchasing power parity; cointegrated VAR;
Other versions of this item:
- Katarina Juselius & Javier Ordóñez, . "The Balassa-Samuelsson effect and the wage, price and unemployment dynamics in Spain," Working Papers on International Economics and Finance 05-13, FEDEA.
- Katarina Juselius & Javier Ordóñez, 2005. "The Balassa-Samuelson Effect and the Wage, Price and Unemployment Dynamics in Spain," Discussion Papers 05-29, University of Copenhagen. Department of Economics.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
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