Exchange Rate Movements and Inflation Performance: The Case of Italy
Summary:
This paper presents an empirical model to study the response of wages and prices to movements in the nominal exchange rate. A four-equation model is applied to Italian data to evaluate the response of tradeable goods prices, consumer prices, and wages following the lira’s exit from the ERM in the fall of 1992. The model tracks reasonably well the inflation performance of tradeables, especially import prices. But it is argued that structural changes in the labor market contribute to an overprediction of price and wage inflation.
Series:
Working Paper No. 1995/041
Subject:
Consumer prices Export prices Import prices Inflation Labor Labor markets Prices Wages
English
Publication Date:
April 1, 1995
ISBN/ISSN:
9781451846041/1018-5941
Stock No:
WPIEA0411995
Pages:
28
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