Merging the purchasing power parity and the Phillips curve literatures: Regional evidence from Italy

Andrea Vaona

No 1282, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: The main purpose of this paper is to merge together two strands of the literature regarding, either directly or indirectly, inflation: the PPP and the Phillips curve ones. In order to accomplish this task, this contribution applies the tools of the Empirical Growth Literature and of Dynamic Panel Data estimation on a sample of 81 Italian provinces from the year 1986 to the year 1998, exploiting cross-sectional variation to avoid to use instruments not directly connected with the inflation generating process. This research strategy allows to conclude that inflation is characterized by a low degree of persistence and by conditional b-convergence across provinces. Its most suitable driving variable is the unemployment rate and there are long-term non neutralities at the regional level.

Date: 2006
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Working Paper: Merging the Purchasing Power Parity and the Phillips Curve Literatures: Regional Evidence from Italy (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1282

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