Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153379
Authors: 
Robalo Marques, Carlos
Year of Publication: 
2008
Series/Report no.: 
ECB Working Paper 945
Abstract: 
This paper investigates the persistence of aggregate wages and prices in Portugal assuming a model of a unionized economy with imperfect competition. An impulse response analysis is conducted where the structural shocks are identified by taking into account the long-run properties of the model, as well as the cointegrating and weak-exogeneity properties of the system. Real wages and wage inflation emerge as especially persistent following an import price shock, while price inflation is more persistent following an unemployment shock. At the business cycle horizon variation in the forecast errors of wages is attributable mainly to unemployment shocks (about 80 percent), whereas variation in the forecast errors of prices is attributable mainly to import price shocks (about 60 percent) and to unemployment shocks (around 20 percent). Productivity shocks explain somewhat less than 10 percent of the variation in forecast errors of wages and prices.
Subjects: 
impulse response function
Persistence
prices
structural error-correction model
Wages
JEL: 
C32
C51
E31
J30
Document Type: 
Working Paper

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