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The Phillips Curve and the Italian Lira, 1861-1998

Alessandra Del Boca, Michele Fratianni, Franco Spinelli and Carmine Trecroci
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Alessandra Del Boca: University of Brescia

No 8, Mo.Fi.R. Working Papers from Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences

Abstract: We examine Italian inflation rates and the Phillips curve with a very long-run perspective, one that covers the entire existence of the Italian lira from political unification (1861) to the entry of Italy in the European Monetary Union (end of 1998). We first study the volatility, persistence and stationarity of the Italian inflation rate over the long run and across various exchange-rate regimes that have shaped Italian monetary history. Next, we estimate alternative Phillips equations and investigate the extent to which nonlinearities, asymmetries and structural changes characterize the inflation-output trade-off in the long run. We capture the effects of structural changes and asymmetries on the estimated parameters of the inflation-output trade-off relying partly on sub-sample estimates and partly on time-varying parameters estimated with the Kalman filter. Finally, we investigate causal relationships between inflation rates and output and extend the analysis to include the US and the UK for comparison purposes. The inference is that Italy has experienced a conventional inflation-output trade-off only during times of low inflation and stable aggregate supply.

Keywords: Inflation; Italian Lira; Phillips curve (search for similar items in EconPapers)
JEL-codes: E31 E32 E5 N10 (search for similar items in EconPapers)
Pages: 30
Date: 2008-11
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-mon
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http://docs.dises.univpm.it/web/quaderni/pdfmofir/Mofir008.pdf First version, 2008 (application/pdf)

Related works:
Journal Article: The Phillips curve and the Italian lira, 1861-1998 (2010) Downloads
Working Paper: The Phillips curve and the Italian lira, 1861-1998 (2009) Downloads
Working Paper: The Phillips Curve and the Italian Lira, 1861-1998 (2008) Downloads
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