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Price Level Convergence in Europe: Did the Introduction of the Euro Matter?

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  • Jesús Crespo Cuaresma

    ()
    (Vienna University of Economics and Business, Institute for Fiscal and Monetary Policy)

  • Balázs Égert

    ()
    (Oesterreichische Nationalbank)

  • Maria Antoinette Silgoner

    ()
    (Oesterreichische Nationalbank)

Abstract

Abstract:Several theoretical arguments suggest that price level divergence across EU countries has diminished in the course of the European integration process as a result of both product market integration and the introduction of the common currency. In this paper, we empirically assess this hypothesis for the euro area countries and a group of control countries since 1990, using price level data on over 160 products and services in 27 European cities. Our conclusions confirm that price convergence took place at the beginning of the 1990s. There is, however, not much evidence that the introduction of the single currency has led to a further narrowing of price differentials. In fact, price dispersion has remained remarkably stable in recent years, whereas it has increased slightly since 2003 in the control group.

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Bibliographic Info

Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Monetary Policy & the Economy.

Volume (Year): (2007)
Issue (Month): 1 ()
Pages: 100–113

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Handle: RePEc:onb:oenbmp:y:2007:i:1:b:5

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Related research

Keywords: price level convergence; euro area; euro.;

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Cited by:
  1. Tomás Slacík, 2008. "(How) Will the Euro Affect Inflation in the Czech Republic? A contribution to the current debate," FIW Working Paper series, FIW 018, FIW.
  2. Fischer, Christoph, 2012. "Price convergence in the EMU? Evidence from micro data," European Economic Review, Elsevier, Elsevier, vol. 56(4), pages 757-776.
  3. Sophie-Charlotte Meyer & Ronald Schettkat, 2013. "Price Convergence in Euroland. Evidence from micro data without noise," Schumpeter Discussion Papers, Universitätsbibliothek Wuppertal, University Library sdp13005, Universitätsbibliothek Wuppertal, University Library.
  4. Friedrich Fritzer, 2012. "Price Level Convergence Before and After the Advent of EMU," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 105–116.
  5. Ulrich Fritsche & Vladimir Kuzin, 2011. "Analysing convergence in Europe using the non-linear single factor model," Empirical Economics, Springer, Springer, vol. 41(2), pages 343-369, October.
  6. Nagayasu, Jun, 2012. "Regional inflation and industrial structure in monetary union," MPRA Paper 37310, University Library of Munich, Germany.

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