The Balassa-Samuelson effect and the wage, price and unemployment dynamics in Spain
This 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.
|Date of creation:||Oct 2005|
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- Francesco Caselli & Silvana Tenreyro, 2004.
"Is Poland the next Spain?,"
Communities and Banking,
Federal Reserve Bank of Boston.
- Francesco Caselli & Silvana Tenreyro, 2005. "Is Poland the Next Spain?," CEP Discussion Papers dp0668, Centre for Economic Performance, LSE.
- Francesco Caselli & Silvana Tenreyro, 2005. "Is Poland the next Spain?," LSE Research Online Documents on Economics 3564, London School of Economics and Political Science, LSE Library.
- Francesco Caselli & Silvana Tenreyro, 2005. "Is Poland the Next Spain?," NBER Working Papers 11045, National Bureau of Economic Research, Inc.
- Caselli, Francesco & Tenreyro, Silvana, 2005. "Is Poland the Next Spain?," CEPR Discussion Papers 4877, C.E.P.R. Discussion Papers.
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- Banerjee, Anindya & Russell, Bill, 2005.
"Inflation and measures of the markup,"
Journal of Macroeconomics,
Elsevier, vol. 27(2), pages 289-306, June.
- Henrik Hansen & Søren Johansen, 1999. "Some tests for parameter constancy in cointegrated VAR-models," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 306-333.
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