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Merging the Purchasing Power Parity and the Phillips Curve Literatures

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  • Andrea Vaona

    (University of Pavia Department of Economics and Quantitative Methods and Kiel Ins titutefor the WorldEconomy, Pavia, Italy, anvaona@libero.it)

Abstract

The main purpose of this article is to merge together two strands of the literature regarding, either directly or indirectly, inflation—specifically, the purchasing power parity and the Phillips curve ones. To accomplish this task, this contribution applies the tools of Dynamic Panel Data estimation on a sample of eighty one Italian provinces from the year 1986 to the year 1998, exploiting cross-sectional variation to avoid using instruments not directly connected with the inflation-generating process. This research strategy allows us to conclude that inflation is characterized by a low degree of persistence and by conditional β-convergence across provinces. Its most suitable driving variable is the unemployment rate, and there are long-term nonneutralities at the regional level.

Suggested Citation

  • Andrea Vaona, 2007. "Merging the Purchasing Power Parity and the Phillips Curve Literatures," International Regional Science Review, , vol. 30(2), pages 152-172, April.
    • Handle: RePEc:sae:inrsre:v:30:y:2007:i:2:p:152-172
    DOI: 10.1177/0160017606298444
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    Cited by:

    1. Andrea Vaona & Guido Ascari, 2012. "Regional Inflation Persistence: Evidence from Italy," Regional Studies, Taylor & Francis Journals, vol. 46(4), pages 509-523, June.
    2. Andrea Vaona, 2015. "The price-price Phillips curve in small open economies and monetary unions: theory and empirics," International Economics and Economic Policy, Springer, vol. 12(2), pages 281-307, June.

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