Economics, Econometrics and Finance
4 years ago

Italy's unique economic policies led to persistent inflation and instability.

RePEc: Research Papers in Economics
Macroeconomic instability and the Phillips curve in Italy
Alessandra Del Boca, Michele Fratianni, Franco Spinelli, Carmine Trecroci

Paper Summary

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The article examines whether Italy had a typical Phillips curve after WWII. The researchers studied the relationship between inflation and real economic activity from 1949 to 1998. They found no strong link between output and prices in Italy, unlike the UK and US. Italy's unique situation was due to a monetary policy controlled by the government and a system that protected wages from inflation. These factors led to ongoing inflation and economic instability until Italy joined the European Monetary Union.