Kiel Working Papers, Kiel Institute for World Economics
No 1282:
Merging the Purchasing Power: Parity and the Phillips Curve Literatures: Regional Evidence from Italy
Andrea Vaona
Abstract: 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.
38 pages, July 2006
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