Disinflation in the Italian economy in an optimal control setting

Abstract

In this article we use optimal control techniques and a nonlinear, small-size econometric model of the Italian economy, with the purpose of analyzing the disinflation process that has characterized the Italian economy during the period 1984–1987. Within the optimization framework, we question a wide range of issues of political economy, the role of incomes policy, and nominal anchors in promoting low-cost disinflation. Copyright Kluwer Academic Publishers 1996

Wage Setting, Wage Curve and Phillips Curve: The Italian evidence

“…All of this has obvious implications for macro-policy. For instance, in 'fighting against inflation', different policy mixes between pegged exchange rate, fiscal austerity and monetary restriction have been endorsed as alternative strategies to eliminate inflation differential, but how long it will take for the economy to shrink the initial differential and how much it will cost in terms of unemployment and output depends very much on nominal rigidities (see, Blanchard and Muet, 1993;Chiarini, 1996;among others).…”