Unemployment and inflation persistence in Spain: Are there Phillips trade-offs?

• Autores: Juan Luis Vega, Juan José Dolado, J. David López Salido
• Localización: Spanish economic review, ISSN 1435-5469, Vol. 2, Nº 3, 2000, págs. 267-291
• Idioma: inglés
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• Dialnet Métricas: 1 Cita
• Resumen

  • Abstract. This paper studies the dynamic behavior of inflation and unemployment in Spain during the period 1964-1997. In particular, we analyze the implications of high persistence in both unemployment and inflation dynamics for inference regarding the size of Phillips trade-offs and sacrifice ratios in the Spanish economy, in response to a demand shock. To do so we use a Stuctural VAR approach with several identification outlines which give rise to alternative interpretations of the joint unemployment-inflation dynamics. When using a bivariate VAR we cannot reject the existence of a permanent output loss of one-half of one percentage point for each percentage point of permanent disinflation. However, when the VAR is augmented with a third variable, in order to disentangle monetary from non-monetary shocks within the demand class, the evidence favours a lower and marginally permanent trade-off with an output loss of about one-fourth of one percentage point.