THE CONSUMPTION-INVESTMENT-UNEMPLOYMENT RELATIONSHIP IN SPAIN: AN ANALYSIS WITH REGIONAL DATA

Roberto Bande and Dolores Riveiro (dolores.riveiro@usc.es)
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Dolores Riveiro: Group of Analysis and Modelling in Economics University of Santiago de Compostela, Spain, Postal: ES

Theoretical and Practical Research in the Economic Fields, 2013, vol. 4, issue 1, 5-24

Abstract: In this paper we analyze the consequences of changes in the consumption patterns on unemployment through an intermediate channel via investment. Specifically, after presenting our theoretical framework, we build a dynamic econometric multi-equational model, in which we estimate a consumption function, an investment function and an unemployment rate equation, using a panel of 17 Spanish regions. This model is characterized by its dynamics and the cross equation relationships. After estimating the model, we run a number of dynamic simulations in order to verify our starting hypothesis, namely that temporary and persistent shocks to consumption have long lasting effects on unemployment, both directly and indirectly, through investment. Our results are especially relevant in the current recessive context of the Spanish economy, which is characterized by severe falls in consumption and unprecedented increases in unemployment.

Date: 2013
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Related works:
Working Paper: The Consumption-Investment-Unemployment Relationship in Spain: An Analysis with Regional Data (2012)
Working Paper: The Consumption-Investment-Unemployment Relationship in Spain: an Analysis with Regional Data (2012)
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