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Market integration and price convergence in the European Union

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  • Ogrokhina, Olena

Abstract

The implementation of international treaties in the European Union was expected to promote integration of consumer markets. Using Economist Intelligence Unit Worldwide Cost of Living Survey data, I analyze the convergence of prices for a range of traded goods and find that large price differences remain across Europe. Using high income non-euro European countries as a control group, I test the effect of the euro and the Single European Act on the convergence of prices within the European Union. Using a difference-in-difference estimation strategy, I find that the Single European Act, rather than the euro, reduced price differences and promoted market integration. Distinguishing between the two stages of the euro implementation shows increasing price divergence as a result of the common currency.

Suggested Citation

  • Ogrokhina, Olena, 2015. "Market integration and price convergence in the European Union," Journal of International Money and Finance, Elsevier, vol. 56(C), pages 55-74.
    • Handle: RePEc:eee:jimfin:v:56:y:2015:i:c:p:55-74
    DOI: 10.1016/j.jimonfin.2015.04.004
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    Cited by:

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    2. Alam, Md. Rafayet & Morshed, A.K.M. Mahbub, 2021. "Price dispersion across U.S. cities: The role of Walmart," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 227-237.
    3. Lim, Eun Son & Breuer, Janice Boucher, 2019. "Free trade agreements and market integration: Evidence from South Korea," Journal of International Money and Finance, Elsevier, vol. 90(C), pages 241-256.
    4. Nikolsko-Rzhevskyy, Alex & Ogrokhina, Olena, 2018. "Behavior of retail prices in common currency areas: The case of the Eurozone," Economic Modelling, Elsevier, vol. 69(C), pages 49-57.
    5. Irena Raguž Krištić & Lucija Rogić Dumančić, 2018. "Product market integration in the Euro area," EFZG Working Papers Series 1804, Faculty of Economics and Business, University of Zagreb.
    6. Ogrokhina, Olena, 2019. "Persistence of prices in the Eurozone capital cities: Evidence from the Economist Intelligence Unit City Data," Economic Modelling, Elsevier, vol. 76(C), pages 330-338.
    7. Balcilar, Mehmet & Kutan, Ali M. & Yaya, Mehmet E., 2017. "Testing the dependency theory on small island economies: The case of Cyprus," Economic Modelling, Elsevier, vol. 61(C), pages 1-11.

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    More about this item

    Keywords

    Price convergence; Euro; Single European Act; Difference-in-difference; European integration;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F15 - International Economics - - Trade - - - Economic Integration

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