MC Strumenti di lettura

The sharp depreciation of the italian lira at the end of 1992 did not lead to a rebound in inflation which was feared at the time: consumer prices maintained a substantially reflective trend, contradicting the experience of similar episodes of the past. This study focuses attention on the question of the impact of the business cycle on profit margins and prices. Although the analysis of what happened in the aftermath of the devaluation is beyond the scope of the work, the econometric evidence that is presented on the direct role of various factors provides useful insights for an interpretation of recent events. The empirical analysis is linked to the prices of output of industrial transformation and sellable services sectors, in order to take into account the sectoral differences of the inflationary process. The authors discuss the role of numerous factors  before submitting the results of the estimates. The estimated equations are then used to conduct some simulations to make the consequences of particular shocks more clear.

 JEL Codes: E31, E32