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Lagged Adjustment Processes and the Natural Rate in Spain: A Comparison with Portugal

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  • Roberto Bande

    () (Departamento de Fundamentos da Análise Económica. Universidade de Santiago de Compostela)

Abstract

This paper provides new evidence on the recent evolution of the unemployment rate in Spain. Specifically, we interpret the movements of the unemployment rate under the Chain Reaction Theory, whereby unemployment is viewed as the outcome of the interplay of a series of lagged adjustment processes in the labour market with persistent shocks, such that the unemployment needs a certain span of time to endogeinize the effects of such shocks. We show that persistent shocks make the actual Spanish unemployment rate depart from its natural level for prolonged periods of time. Portugal, on the contrary, shows greater labour market flexibility, which allows for faster adjustment, and hence, lower unemployment persistence.

Suggested Citation

  • Roberto Bande, 2002. "Lagged Adjustment Processes and the Natural Rate in Spain: A Comparison with Portugal," Documentos de trabajo - Analise Economica 0021, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
  • Handle: RePEc:edg:anecon:0021
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    1. Blanchard, Olivier & Jimeno, Juan F, 1995. "Structural Unemployment: Spain versus Portugal," American Economic Review, American Economic Association, vol. 85(2), pages 212-218, May.
    2. Roberto Bande & Melchor Fernández & Victor Montuenga, 2001. "Disparidades regionales en la tasa de paro: El papel del mecanismo de determinación salarial," Documentos de trabajo - Analise Economica 0018, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
    3. Roberto Bande, 2002. "Ajustes Dinámicos en las Tasas de Paro: España vs. Portugal," Documentos de trabajo - Analise Economica 0020, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
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