Ricerc@Sapienza

We estimate with Bayesian techniques the Italian dynamic General Equilibrium Model (IGEM), which has been developed at the Italian Treasury Department, Ministry of Economy and Finance, to assess the effects of alter-native policy interventions. We analyze and discuss the estimated effects of various shocks on the Italian economy. Compared to the calibrated version used for policy analysis, we find a lower wage rigidity and higher adjustment costs. The degree of prices and wages indexation to past inflation is much smaller than the indexation level assumed in the calibrated model.

This paper aims at identifying the main drivers of the Italian economic cycle. To this end, we estimate a small-open economy model based on a dual labor market, which captures the main features of the Italian economy. Our results indicate that labor market rigidities are important structural features of the Italian economy, but they provide a limited contribution in explaining the business cycle fluctuations. Long-term dynamics are mostly driven by supply factors (productivity and markups).

Our paper derives and estimates a New Keynesian wage Phillips curve that accounts for intrinsic inertia. Our approach considers a wage-setting model featuring an upward-sloping hazard function, that is based on the notion that the probability of resetting a wage depends on the time elapsed since the last reset. According to our specification, we obtain a wage Phillips curve that also includes backward-looking terms, which account for persistence. We test the slope of the hazard function using GMM estimation.