Output and unemployment, Portugal, 2008–2012

José Maria

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: The Portuguese economy experienced a dramatic 2008–2012 period. Gross Domestic Product fell around 10%, while the unemployment rate jumped 8 percentage points, reaching almost 17% by 2012Q4. A semi-structural model with rational expectations—named, for ease of reference, Model Q—largely assigns such developments to “non-cyclical disturbances” in product and labour markets. The economy was also severely hit by two recessive periods in the euro area, and to a lesser extent by abnormally high risk premia. Model Q embodies a relatively robust Okun’s law, but not without important revisions in trend components. Recursive estimates over 2008-2012 include a decrease in the longrun real interest rate, shared by both Portugal and the euro area, as well as a decrease in the long-run growth rate of the trend component of output, mirrored by an increase in long-run unemployment, which raises “secular stagnation” concerns. ModelQ fits the characteristics of a small economy integrated in the credible monetary union, and is parametrized with Bayesian techniques.

JEL-codes: C51 E32 E52 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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