Changes of the aggregate supply conditions in Italy: a small econometric model of wages and prices dynamics

Through the estimation of a small econometric model of the nominal wages and prices dynamics in Italy, obtained within a cointegrated VAR framework, this paper intends to identify some changes that occurred in aggregate supply conditions from the seventies to the end of the nineties of the last century. The paper analyses the changes in the static equations of the demand and supply real wage and the sets of dynamic responses of nominal wages, prices, unemployment, productivity and real exchange rate. The analysis is based on a competing claims model inspired by a well-known work of Modigliani and Padoa Schioppa (1977). The empirical analysis makes it possible to evaluate the evolution of the Phillips curve in the three decades examined and to highlight some macroeconomic evidence of the tendency towards a more flexible labour market observed in the Eighties and Nineties.