In this paper we introduce new definitions of pairwise and multivariate similarity between short-run dynamics of inflation rates in terms of equality of forecast functions and show that in the context of invertible ARIMA processes the Autoregressive distance introduced by Piccolo (1990) is a useful measure to evaluate such similarity. Then, we study the similarity of shortrun inflation dynamics across EU-15 area countries during the Euro period. Consistent with studies on inflation differentials and inflation persistence, our findings suggest that after seven years from the launch of the Euro the degree of similarity of short-run inflation dynamics across EU countries is still weak.
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Paper provided by Universita' Politecnica delle Marche (I), Dipartimento di Economia in its series Working Papers with number
289.
Find related papers by JEL classification: C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
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