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Aggregation and euro area Phillips curves

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Author Info
Julian Benedict Morgan () (European Central Bank, Postfach 160319, 60311 Frankfurt am Main, Germany.)
Silvia Fabiani () (University of Cambridge - Faculty of Economics and Politics, Austin Robinson Building, Sidgwick Avenue, Cambridge CB3 9DD, United Kingdom.)

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Abstract

This paper examines the issue of the impact of aggregation in the empirical analysis of euro area labour markets. A Phillips Curve describing the adjustment of unit labour costs is estimated at the national and aggregate level for the 5 largest euro area countries. Potential sources of aggregation bias are investigated - such as differences in parameter coefficients and a lack of correlation in the independent variables across countries - as well as the potentially offsetting statistical averaging effect. Finally the out-of-sample forecasting performance of both approaches is evaluated. The results point to some limited advantages of analysing wage developments at the national rather than at the area-wide level. The paper concludes that if major advantages in undertaking national analysis do exist, they are likely to arise from the ability to develop country-specific structures for the Phillips Curves and not from aggregation biases that emerge when a common structure is used. JEL Classification: C52; C53; E24; J30.

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Publisher Info
Paper provided by European Central Bank in its series Working Paper Series with number 213.

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Length: 33 pages
Date of creation: Feb 2003
Date of revision:
Handle: RePEc:ecb:ecbwps:20030213

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Related research
Keywords: Euro area; Phillips curve; wage growth.;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ricardo Mestre & Silvia Fabiani, 2001. "A system approach for measuring the euro area NAIRU," Working Paper Series 065, European Central Bank. [Downloadable!]
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  2. Gabriel Fagan & JÊrÆme Henry, 1998. "Long run money demand in the EU: Evidence for area-wide aggregates," Empirical Economics, Springer, vol. 23(3), pages 483-506. [Downloadable!] (restricted)
  3. Ricardo Mestre & Silvia Fabiani, 2000. "Alternative measures of the NAIRU in the Euro area: estimates and assessment," Working Paper Series 17, European Central Bank. [Downloadable!]
  4. Dave Turner & Elena Seghezza, 1999. "Testing for a Common OECD Phillips Curve," OECD Economics Department Working Papers 219, OECD, Economics Department. [Downloadable!]
  5. Luca Dedola & Eugenio Gaiotti & Luca Silipo, 2001. "Money demand in the euro area: do national differences matter?," Temi di discussione (Economic working papers) 405, Bank of Italy, Economic Research Department. [Downloadable!]
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  6. Silvia Fabiani & Alberto Locarno & Gian Paolo Oneto & Paolo Sestito, 1997. "NAIRU: Incomes Policy and Inflation," OECD Economics Department Working Papers 187, OECD, Economics Department. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marc-Alexandre Senegas & Paul De Grauwe, 2004. "Transmission parameter uncertainty and heterogeneity in EMU: which federal monetary policy for the ECB?," Money Macro and Finance (MMF) Research Group Conference 2003 86, Money Macro and Finance Research Group. [Downloadable!]
  2. Thomas Warmedinger, 2004. "Import prices and pricing-to-market effects in the euro area," Working Paper Series 299, European Central Bank. [Downloadable!]
  3. Nicolien Schermer, 2005. "The Synchronisation of European Labour Markets: An Analysis Using Aggregate Philips Curves," DNB Working Papers 076, Netherlands Central Bank, Research Department. [Downloadable!]
  4. Beissinger, Thomas, 2004. "Strukturelle Arbeitslosigkeit in Europa: Eine Bestandsaufnahme," Regensburger Diskussionsbeiträge zur Wirtschaftswissenschaft 389, University of Regensburg, Department of Economics. [Downloadable!]
  5. Yeşim Kuştepeli, 2005. "A comprehensive short-run analysis of a (possible) Turkish Phillips curve," Applied Economics, Taylor and Francis Journals, vol. 37(5), pages 581-591, March. [Downloadable!] (restricted)
  6. Franz, Wolfgang, 2003. "Will the (German) NAIRU Please Stand up?," ZEW Discussion Papers 03-35, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  7. Heather Anderson & Mardi Dungey & Denise Osborn & Farshid Vahid, 2007. "Constructing Historical Euro Area Data," Money Macro and Finance (MMF) Research Group Conference 2006 99, Money Macro and Finance Research Group. [Downloadable!]
    Other versions:
  8. Eilev S. Jansen, 2004. "Modelling inflation in the Euro Area," Working Paper 2004/10, Norges Bank. [Downloadable!]
    Other versions:
  9. Mayes , David G. & Virén , Matti, 2004. "Asymmetries in the Euro area economy," Research Discussion Papers 9/2004, Bank of Finland. [Downloadable!]
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  10. Jaan Masso & Karsten Staehr, 2005. "Inflation Dynamics And Nominal Adjustment In The Baltic States," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 35, Faculty of Economics and Business Administration, University of Tartu (Estonia). [Downloadable!]
    Other versions:
  11. Lutz Kilian & Atsushi Inoue, 2003. "On the selection of forecasting models," Working Paper Series 214, European Central Bank. [Downloadable!]
    Other versions:
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