Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152647
Authors: 
Fabiani, Silvia
Morgan, Julian
Year of Publication: 
2003
Series/Report no.: 
ECB Working Paper 213
Abstract: 
This paper examines the issue of the impact of aggregation in the empirical analysis of euro area labour markets. A Phillips Curve describing the adjustment of unit labour costs is estimated at the national and aggregate level for the 5 largest euro area countries. Potential sources of aggregation bias are investigated ­ such as differences in parameter coefficients and a lack of correlation in the independent variables across countries ­ as well as the potentially offsetting statistical averaging effect. Finally the out-of-sample forecasting performance of both approaches is evaluated. The results point to some limited advantages of analysing wage developments at the national rather than at the area-wide level. The paper concludes that if major advantages in undertaking national analysis do exist, they are likely to arise from the ability to develop country-specific structures for the Phillips Curves and not from aggregation biases that emerge when a common structure is used.
JEL: 
C52
C53
E24
J30
Document Type: 
Working Paper

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