Introduction 2 Broad factors behind Italian unemployment 3 A benchmark identification of structural unemployment 4 The sVAR approach 4.1 The stylised model 4.2 Preliminary univariate testing 4.3 Empirical evidence: VAR estimates 4.4 The impulse response functions 5 Reconstructing unemployment 6 Concluding remarks References Figures Appendix 1 The solution of the model Appendix 2 Data sources Appendix 3 Univariate pre-testing Appendix 4 Introducing a fifth shock European Central Bank Working Paper Series
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2 ABSTRACT/RÉSUMÉItaly has been one of the few industrial countries resorting to incomes policy in the current decade. Many Italian observers have attributed to this policy the remarkable slowdown in wage and price inflation. However, no apparent progress has been made concerning labour market unbalances, as the unemployment rate remains 4 percentage points above the already high level inherited from the 80s. This paper analyses this experience: it looks at the evidence of changes in the bargaining structure stemming from the incomes policies agreements, discusses their possible long run impact in terms of NAIRU and features of the inflationary process, presents a quantitative assessment of the specific contribution of those agreements to the inflation outcome. The analysis is carried out by looking at the presence of structural breaks in an aggregate-wage equation and resorting to counterfactual simulations of a large macroeconomic model (the Bank of Italy quarterly model).The empirical results show that the incomes policy agreements were conducive to a period of wage moderation: the absence of the incomes policy would have pushed-up consumer price inflation by 2-3 percentage points in 1996. Trying to obtain the same disinflation path without wage moderation would have asked for an even more restrictive monetary policy, whose adverse impact on nominal GDP growth and public debt interest payments would have jeopardised the consolidation of public finances, putting at risk the credibility of (and the actual chance to reach) those inflation targets.Less clear-cut is the evidence on long-run changes. Concerning the changes in the wage-to-price adjustment process, the absence indexation and the two years horizon of the national contracts have increased the inertia of nominal wages. Concerning the real side of economy, on both theoretical and empirical grounds there is only weak evidence of a reduction in the NAIRU associated to the new bargaining system. **** L'Italie a été l'un de rares pays à recourir à une politique des revenus pendant cette décennie. De nombreux observateurs italiens ont attribué à cette politique le remarquable ralentissement de l'inflation des salaire et des prix. Toutefois, aucun progrès apparent n'a été réalisé concernant les déséquilibres du marché du travail, le taux de chômage restant 4 points plus haut que son niveau déjà élevé des années 80.Cet article analyse cette expérience: il examine les effets du changement de l'organisation des négociations salariales lié aux accords de politiques des revenus, discute leurs éventuelles conséquences à long terme sur le NAIRU et les caractéristiques du processus d'inflation et fournit une évaluation quantitative de la contribution de ces accords sur les performances d'inflation. L'analyse est effectuée à partir d'une recherche des ruptures structurelles de l'équation de salaire à un niveau agrégé et de simulations à l'aide d'un modèle macro-économique de grande taille (le modèle trimestriel de la Banque d'Italie).Les résultats empiriques montrent q...
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