Wage Bargaining and the Phillips Curve in Italy
The theme of this paper is whether there was a textbook-like Phillips Curve in post-WWII Italy. We estimate a standard model of the relationship between inflation and the level of real economic activity over the 1949-1998 period and find no evidence of a significant and positive feedback from output to prices. We also estimate similar models for the UK and the US and compare them with the Italian experience. Italy stands out as sharply different from the two Anglo-Saxon countries. We attribute this difference, among other factors, to the role of wage coordination and indexation mechanisms. In particular, the scala mobile, the rigid indexation mechanism aimed at protecting wages from inflation contributed to the persistent inflation bias that Italy experienced almost until its entry into the EMU.
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- Kim, Chang-Jin & Nelson, Charles R., 2006. "Estimation of a forward-looking monetary policy rule: A time-varying parameter model using ex post data," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 1949-1966, November.
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