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

Katarina Juselius

No 03-01, Discussion Papers from University of Copenhagen. Department 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.

Keywords: European unemployment; PPP convergence; Balassa-Samuelsson effect; cointegrated VAR (search for similar items in EconPapers)
JEL-codes: C3 J3 J5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-ifn and nep-lab
Date: 2002-12
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Persistent link: http://EconPapers.repec.org/RePEc:kud:kuiedp:0301

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