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Wage, Price, and Unemployment Dynamics and the Convergence to Purchasing Power Parity in the Euro Area

Author

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  • Katarina Juselius

    (University of Copenhagen, Institute of Economics)

Abstract

The paper discusses the determination of wages, prices, productivity and unemployment in the Euro-wide area in the post Bretton Woods period. The econometric results provide strong evidence on a regime shift at the start of the EMS and the empirical analysis is done separately for the two regimes. Two variables, measuring different aspects of the convergence towards European purchasing power parity, are shown to be crucial for explaining inflation and unemployment behavior in the more recent regime. The results point to the importance of being on a sustainable ppp level when fixing the exchange rates.

Suggested Citation

  • Katarina Juselius, 2002. "Wage, Price, and Unemployment Dynamics and the Convergence to Purchasing Power Parity in the Euro Area," Discussion Papers 03-01, University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:kuiedp:0301
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    File URL: http://www.econ.ku.dk/english/research/publications/wp/2003/0301.pdf/
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    References listed on IDEAS

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    Cited by:

    1. Bohdan Klos & Ryszard Kokoszczynski & Tomasz Lyziak & Jan Przystupa & Ewa Wrobel, 2005. "Structural Econometric Models in Forecasting Inflation at the National Bank of Poland," NBP Working Papers 31, Narodowy Bank Polski, Economic Research Department.

    More about this item

    Keywords

    European unemployment; PPP convergence; Balassa-Samuelsson effect; cointegrated VAR;

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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