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The Consumption-Investment-Unemployment Relationship in Spain: An Analysis with Regional Data

Author

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  • Roberto Bande
  • Dolores Riveiro

    (GAME-IDEGA, Universidade de Santiago de Compostela)

Abstract

In this paper we analyse the consequences of changes in the consumption patterns on unemployment through an intermediate channel via investment. Specifically, after presenting our theoretical framework, we build a dynamic econometric multiequational model, in which we estimate a consumption function, an investment function and an unemployment rate equation, using a panel of 17 Spanish regions. This model is characterised by its dynamics and the cross equation relationships. After estimating the model, we run a number of dynamic simulations in order to verify our starting hypothesis, namely that temporary and persistent shocks to consumption have long lasting effects on unemployment, both directly and indirectly, through investment. Our results are especially relevant in the current recessive context of the Spanish economy, which is characterised by severe falls in consumption and unprecedented increases in unemployment.

Suggested Citation

  • Roberto Bande & Dolores Riveiro, 2012. "The Consumption-Investment-Unemployment Relationship in Spain: An Analysis with Regional Data," Documentos de trabajo - IRENe 0003, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
    • Handle: RePEc:edg:irenen:0003
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    More about this item

    Keywords

    Consumption; investment; unemployment; panel data;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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