[go: up one dir, main page]

  EconPapers    
Economics at your fingertips  
 

Balassa-Samuelson and Wage, Price and Unemployment Dynamics in the Spanish Transition to EMU Membership

Javier Ordóñez and Katarina Juselius

Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), 2009, vol. 3, No 2009-4, 30 pages

Abstract: This paper provides an empirical investigation of the wage, price and unemployment dynamics that have taken place in Spain during the last two decades. The aim of this paper is to shed light on the impact of the European economic integration on Spanish labour market and the convergence to a European level of prosperity. We found that the Balassa-Samuelson effect, product market competition, and capital liberalization have been the main driving forces in this period. The adjustment dynamics show that Spanish inflation has adjusted in the long run to the European purchasing power parity level (as measured by the German price level) corrected for the Balassa-Samuelson effect. In the medium run this long-run convergence was achieved by two types of Phillips curve mechanisms; one where the inflation/unemployment trade-off was triggered off for different levels of the interest rate and real wage costs, another one where the trade-off was a function of the real exchange rate and the interest rate. Excess wages and/or increasing cost levels in the tradable sector led to higher unemployment rather than higher prices. Thus, much of the burden of adjustment was carried by unemployment in this period.

Keywords: Balassa-Samuelson effect; nominal and real convergence; unemployment dynamics; purchasing power parity; cointegrated VAR (search for similar items in EconPapers)
JEL-codes: C32 E24 (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://dx.doi.org/10.5018/economics-ejournal.ja.2009-4
https://www.econstor.eu/bitstream/10419/27524/1/economics_2009-4.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifweej:7548

DOI: 10.5018/economics-ejournal.ja.2009-4

Access Statistics for this article

Economics - The Open-Access, Open-Assessment E-Journal (2007-2020) is currently edited by Dennis J. Snower

More articles in Economics - The Open-Access, Open-Assessment E-Journal (2007-2020) from Kiel Institute for the World Economy (IfW Kiel) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().

 
Page updated 2024-11-07
Handle: RePEc:zbw:ifweej:7548