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Price convergence in the EMU? Evidence from micro data

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  • Fischer, Christoph

Abstract

The establishment of the European Monetary Union (EMU) was widely expected to cause price convergence among member states. In an investigation of this claim, the present study avoids problems of comparability and representativeness by using an extremely detailed and comprehensive scanner database on washing machine prices and sales volumes for 17 European countries. A hedonic regression yields country-specific time series for quality-adjusted price differentials. Statistically and economically significant deviations from the Law of One Price emerge. Logt tests firmly reject price convergence among EMU countries. Small convergence clusters can be identified but they are unrelated to EMU membership.

Suggested Citation

  • Fischer, Christoph, 2012. "Price convergence in the EMU? Evidence from micro data," European Economic Review, Elsevier, vol. 56(4), pages 757-776.
    • Handle: RePEc:eee:eecrev:v:56:y:2012:i:4:p:757-776
    DOI: 10.1016/j.euroecorev.2012.01.008
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    More about this item

    Keywords

    Price convergence; Law of One Price; Euro introduction; Logt test; Hedonic price regression; Scanner data;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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