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Merging the Purchasing Power: Parity and the Phillips Curve Literatures: Regional Evidence from Italy

  • Andrea Vaona

The main purpose of this paper is to merge together two strands of the literature regarding, either directly or indirectly, inflation: the PPP and the Phillips curve ones. In order to accomplish this task, this contribution applies the tools of the Empirical Growth Literature and of Dynamic Panel Data estimation on a sample of 81 Italian provinces from the year 1986 to the year 1998, exploiting cross-sectional variation to avoid to use instruments not directly connected with the inflation generating process. This research strategy allows to conclude that inflation is characterized by a low degree of persistence and by conditional b-convergence across provinces. Its most suitable driving variable is the unemployment rate and there are long-term non neutralities at the regional level.

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1282.

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Length: 38 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:kie:kieliw:1282
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