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Inflation Convergence In Central And Eastern European Economies

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Author Info
Alina M. Spiru (Lancaster University)
Abstract

In this study, the degree of convergence of inflation rates of Central and East European economies to a variety of measures of European norm inflation is assessed using a range of econometric techniques. These include unit root testing based upon time series and panels of data and – an innovation to the pertinent literature – tests of nonlinear convergence. The results suggest that while convergence can be revealed in a number of cases, there is some sensitivity associated with the testing framework, in particular whether time series or panel methods are used. Furthermore, the inflation convergence performance of the Central and Eastern European countries is conditional on the chosen inflation benchmark, the composition of the panel and the correlations among members. Moreover, by conducting a battery of linearity tests, it is found that nonlinear inflation convergence is virtually ubiquitous for the period that includes the accession of the Central and Eastern European former transition economies into the EU.

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File URL: http://www.rebe.rau.ro/RePEc/rau/journl/WI08/REBE-WI08-A2.pdf
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Publisher Info
Article provided by Romanian-American University in its journal Romanian Economic and Business Review.

Volume (Year): 3 (2008)
Issue (Month): 4 (Winter)
Pages: 14-34
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:rau:journl:v:3:y:2008:i:4:p:14-34

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Related research
Keywords: inflation convergence; panel data; linearity tests;

References listed on IDEAS
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  1. Fabio Busetti & Lorenzo Forni & Andrew Harvey & Fabrizio Venditti, 2006. "Inflation convergence and divergence within the European Monetary Union," Working Paper Series 574, European Central Bank. [Downloadable!]
    Other versions:
  2. Brada, Josef C. & Kutan, Ali M., 2001. "The convergence of monetary policy between candidate countries and the European Union," Economic Systems, Elsevier, vol. 25(3), pages 215-231, September. [Downloadable!] (restricted)
  3. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1991-1), pages 107-182. [Downloadable!]
    Other versions:
  4. Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-30, March. [Downloadable!] (restricted)
    Other versions:
  5. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Technical Working Papers 0100, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Breuer, Janice Boucher & McNown, Robert & Wallace, Myles, 2002. " Series-Specific Unit Root Tests with Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(5), pages 527-46, December. [Downloadable!] (restricted)
  7. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Harvey, A. & Bates, D., 2003. "Multivariate Unit Root Tests and Testing for Convergence," Cambridge Working Papers in Economics 0301, Faculty of Economics, University of Cambridge. [Downloadable!]
  9. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July. [Downloadable!] (restricted)
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  10. Bernard, Andrew B. & Durlauf, Steven N., 1996. "Interpreting tests of the convergence hypothesis," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 161-173. [Downloadable!] (restricted)
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  11. Axel A. Weber & Günter W. Beck, 2005. "Price Stability, Inflation Convergence and Diversity in EMU: Does One Size Fit All?," CFS Working Paper Series 2005/30, Center for Financial Studies. [Downloadable!]
  12. Josef C. Brada & Ali M. Kutan & Su Zhou, 2002. "Real and Monetary Convergence within the European Union and Between the European Union and Candidate Countries: A Rolling Cointegration Approach," William Davidson Institute Working Papers Series 458, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  13. Josef Brada, Ali M. Kutan, 2002. "Balkan and Mediterranean Candidates for European Union Membership: The Convergence of Their Monetary Policy with That of the European Central Bank," Eastern European Economics, M.E. Sharpe, Inc., vol. 40(4), pages 31-44, July. [Downloadable!] (restricted)
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  14. Durlauf, Steven N. & Quah, Danny T., 1999. "The new empirics of economic growth," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 4, pages 235-308 Elsevier. [Downloadable!] (restricted)
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  15. Evans, Paul & Karras, Georgios, 1996. "Convergence revisited," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 249-265, April. [Downloadable!] (restricted)
  16. Mark J. Holmes, 1998. "Inflation Convergence In The Erm: Evidence For Manufacturing And Services," International Economic Journal, Korean International Economic Association, vol. 12(3), pages 1-16, October. [Downloadable!] (restricted)
  17. Bernard, Andrew B & Durlauf, Steven N, 1995. "Convergence in International Output," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 97-108, April-Jun. [Downloadable!] (restricted)
    Other versions:
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