Six variations on fair wages and the long-run Phillips curve

The present paper explores the connection between inflation and unemployment in different models with fair wages both in the short and in the long runs. Under customary assumptions regarding the sign of the parameters of the effort function, more inflation lowers the unemployment rate, though to a declining extent. This is because firms respond to inflation - that spurs effort by decreasing the reference wage - by increasing employment, so to maintain the effort level constant, as implied by the Solow condition. Under wage staggering this effect is stronger because wage dispersion magnifies the impact of inflation on effort. A stronger effect of inflation on unemployment is also produced under varying as opposed to fixed capital, given that in the former case the boom produced by a monetary expansion is reinforced by an increase in investment. Our baseline results are robust to the adoption of a model based on reciprocity in labour relations. Therefore, we provide a new theoretical foundation for recent empirical contributions finding negative long- and short-run effects of inflation on unemployment.efficiency wages, money growth, long-run Phillips curve, trend inflation, wage staggering, reciprocity in labour relations

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

The main purpose of this paper is to merge together two strands of the literature regarding, either directly or indirectly, infation: 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 vari- able is the unemployment rate and there are long-term non neutralities at the regional level.Phillips Curve, Regions, Inflation

Granger non-causality tests between (non)renewable energy consumption and output in Italy since 1861: the (ir)relevance of structural breaks

The present paper considers an Italian dataset with an annual frequency from 1861 to 2000. It implements Granger non-causality tests between energy consumption and output contrasting methods allowing for structural change with those imposing parameter stability throughout the sample. Though some econometric details can differ, results have clear policy implications. Energy conservation policies are likely to hasten an underlying tendency of the economy towards a more efficient use of fossil fuels. The abandonment of traditional energy carriers was a positive change.renewable energy, non-renewable energy, real GDP, Granger-causality, cointegration

The sensitivity of nonparametric misspecification tests to disturbance autocorrelation

We show that some nonparametric specification tests can be robust to disturbance autocorrelation. This robustness can be affected by the specification of the true model and by the sample size. Once applied to the prediction of changes in the Euro Repo rate by means of an index based on ECB wording, we find that the least sensitive nonparametric tests can have a comparable performance to a RESET test with robust standard errors.nonparametric misspecification tests, serial correlation, central bank communication.

On the gravitation and convergence of industry profit rates in Denmark, Finland, Italy and the US

The hypotheses of profit rates gravitating around or converging towards a common value is tested using Danish, Finnish, Italian and US data. Both hypotheses are rejected for all the countries considered. This is interpreted as the result of limitations to capital mobility and of persistent differentials in the innovative performance of industries.capital mobility, gravitation of profit rates, convergence, SURE estimation, exactly median unbiased estimator

On the gravitation and convergence of industry incremental rates of return in OECD countries

The hypotheses of sectoral incremental rates of returns gravitating around or converging towards a common value are tested on data for various OECD countries relying on an econometric method able to account for residual autocorrelation and cross-sector correlation. Our null hypotheses receive only a mixed empirical support. This is interpreted as the result of limitations to capital mobility and of persistent differentials in the innovative performance of industries.capital mobility, gravitation, convergence, incremental rates of returns, SURE estimation, exactly median unbiased estimator

STATA tip: A quick trick to perform a Roy-Zellner test for poolability in Stata

We show how to easily implement a Roy-Zellner test for poolability in STATA and we offer an application to the Grunfeld dataset.poolability, Roy-Zellner test, Grunfeld dataset

Inflation persistence, structural breaks and omitted variables: a critical view

Recent empirical contributions assess time changes in inflation persistence by means of simple autoregressive models. Their reliability is discussed in the light of the econometric literature on model misspecification and it is showed that their results can be misleading due to the omission of relevant variables.inflation persistence, structural breaks, omitted variables, model misspecification, serial correlation.

Regional spillover effects of renewable energy generation in Italy

In a multivariate setting, we document that renewable energy generation has a positive impact on economic growth at the regional level in Italy. We do so by adopting panel data unit-root and cointegration tests as well as Granger non-causality tests relying on the system GMM estimator. Our results are interpreted in three ways. Renewable energy generation alleviates balance-of-payments constraints and reduces the exposure of a regional economy to the volatility of the price of fossil fuels and to negative environmental and health externalities deriving from non-renewable energy generation. Therefore, our evidence supports policies promoting renewable energy generation.renewable energy generation, economic growth, panel unit root and cointegration tests, Granger causality, Italy, panel error correction model, regions.

Nonparametric and semiparametric evidence on the long-run effects of inflation on growth

Two major findings of the empirical literature on the connec tion between inflation and output growth is that their relationship is non linear and that there exists a threshold inflation level be low which inflation has a positive impact on growth and above which inflation has a negative impact on growth. In this paper we adopt both a nonparametric estimator and a semiparametric IV one to show that the first finding holds true even dropping the specification assumptions typical of parametric models. We also show that a threshold level does exist and it is around 12% for developed countries. Below this level inflation does not appear to have any substantial effect on growth.Inflation, Growth