A Univariate Analysis of Unemployment and Inflation in Italy: A Fractionally Integrated Approach

Luis Gil-Alana

Brazilian Review of Econometrics, 2003, vol. 23, issue 2

Abstract: In this article we examine the behaviour of unemployment and inflation in Italy (1970-1994) by means of fractionally integrated techniques. Using a version of the tests of Robinson (1994a) that permits us to test I(d) statistical models, the results show that both variables are I(d) with d smaller than 1, thus implying mean reverting behaviour. This order of integration substantially varies depending on how we specify the I(O) disturbances, though in general, it oscillates around 0.80 for unemployment and 0.60 for inflation, suggesting that unemployment is more persistent than inflation. Splitting the sample in 1980, the degree of persistence seems higher for the second subperiod in both variables.

Date: 2003
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