This paper explores empirically the hypothesis that in Italy the change in monetary policy stance starting from 1979 was one of the causes of the wage moderation that began in the early 1980s and which led to the peculiarly Italian problem of “low wages”, mentioned recently by the Governor of the Bank of Italy. The theoretical background forming the basis for the empirical test is a New-Keynesian general equilibrium model with real rigidities; the hypothesis explores the role monetary policy may play in modifying the static equilibrium relations of the labor market (wage-setting and price-setting). The Italian labor market static equilibrium relations and a Taylor rule are estimated and identified, within a cointegrated VAR (Vector Autoregressive) model. The analysis is then conducted in the framework of a Markov switching vector error correction model that allows for regime shifts in the intercept term. While the results obtained confirm the existence of a major break common both to monetary policy and the labor market during the transition from the 1970s to the 1980s, they also appear to exclude the existence in the 1980s and 1990s of common regimes – in the precise sense used in Markov regime switching – between the Taylor rule, wage-setting and price-setting equations.
La «questione dei bassi salari» in Italia: l’interazione tra rigidità salariale reale e politica monetaria. Ipotesi interpretativa e verifica empirica per il periodo 1970-1997
BINOTTI, ANNETTA MARIA;GHIANI, ENRICO
2011-01-01
Abstract
This paper explores empirically the hypothesis that in Italy the change in monetary policy stance starting from 1979 was one of the causes of the wage moderation that began in the early 1980s and which led to the peculiarly Italian problem of “low wages”, mentioned recently by the Governor of the Bank of Italy. The theoretical background forming the basis for the empirical test is a New-Keynesian general equilibrium model with real rigidities; the hypothesis explores the role monetary policy may play in modifying the static equilibrium relations of the labor market (wage-setting and price-setting). The Italian labor market static equilibrium relations and a Taylor rule are estimated and identified, within a cointegrated VAR (Vector Autoregressive) model. The analysis is then conducted in the framework of a Markov switching vector error correction model that allows for regime shifts in the intercept term. While the results obtained confirm the existence of a major break common both to monetary policy and the labor market during the transition from the 1970s to the 1980s, they also appear to exclude the existence in the 1980s and 1990s of common regimes – in the precise sense used in Markov regime switching – between the Taylor rule, wage-setting and price-setting equations.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
