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

  • Roberto Bande

    ()

  • Dolores Riveiro

    (GAME-IDEGA, Universidade de Santiago de Compostela)

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.

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Paper provided by IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia in its series Documentos de trabajo - IRENe with number 0003.

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Length: 28 pages
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:edg:irenen:0003
Contact details of provider: Postal: Chalé dos Catedráticos, 1. Avda. das Ciencias s/n. Campus Vida, 15782 Santiago de Compostela
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