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On the determinants of inflation in Italy: evidence of cost-push effects before the European Monetary Union

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  • Bertocco Giancarlo

    ()
    (Department of Economics, University of Insubria, Italy)

  • Fanelli Luca

    ()
    (Department of Statistical Sciences, University of Bologna, Italy)

  • Paruolo Paolo

    ()
    (Department of Economics, University of Insubria, Italy)

Abstract

This paper provides evidence on price markup and inflation dynamics in Italy over the period 1970-1998. We investigate the price mark-up on imported and labor costs and its relation to inflation, using cointegration techniques. It is found that, despite different policy regimes across decades, the relation between the markup and inflation is remarkably stable, and useful in predicting inflation dynamics.This evidence clarifies that pure monetarist theories of inflation are not able to account for the price dynamics in Italy from the seventies up to stage III of the European Monetary Union.

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Bibliographic Info

Paper provided by Department of Economics, University of Insubria in its series Economics and Quantitative Methods with number qf0223.

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Length: 21 pages
Date of creation: Dec 2002
Date of revision:
Handle: RePEc:ins:quaeco:qf0223

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Web page: http://www.uninsubria.it/uninsubria/facolta/econo.html
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Keywords: Inflation dynamics; mark-up model; monetary policy; Phillips curve; cointegration; equilibrium correction model.;

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Cited by:
  1. Jose A. Murillo & Sara G. Castellanos, 2004. "Inflation Dynamics’ Micro Foundations: How Important is Imperfect Competition Really?," Econometric Society 2004 Latin American Meetings 78, Econometric Society.

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