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Wages and Prices in Europe: A Test of the German Leadership Thesis

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Author Info
Artis, Michael J
Nachane, Dilip M

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Abstract

The paper presents various tests of the hypothesis that, through the mechanism of the European Monetary System. Germany exercised a counter-inflationary leadership role in the 1980s. Evidence is provided that expectations of German inflation may be thought of as having impacted more strongly on expectations of inflation in other EMS countries in the EMS period than on non-EMS countries (the UK) and in earlier periods. Co-integration tests show inflation rates in partner EMS member countries to be cointegrated with inflation in Germany in the EMS period, but the same is true for the UK suggesting that the EMS arrangements could not have been responsible. Co-integration tests also reveal that bilateral exchange rates have not been particularly stable in this period and do not follow P.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 296.

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Date of creation: Mar 1989
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Handle: RePEc:cpr:ceprdp:296

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Related research
Keywords: European Monetary System; Inflation; Prices; Wages;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Philip M. Young & Owen Evens & Horst Ungerer & Thomas H. Mayer, 1986. "The European Monetary System: Recent Developments," IMF Occasional Papers 48, International Monetary Fund.
  2. Baillie, Richard T. & Selover, David D., 1987. "Cointegration and models of exchange rate determination," International Journal of Forecasting, Elsevier, vol. 3(1), pages 43-51. [Downloadable!] (restricted)
  3. Artis, Michael J & Taylor, Mark P, 1988. "Exchange Rates and the EMS: Assessing the Track Record," CEPR Discussion Papers 250, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. Sargan, John Denis & Bhargava, Alok, 1983. "Testing Residuals from Least Squares Regression for Being Generated by the Gaussian Random Walk," Econometrica, Econometric Society, vol. 51(1), pages 153-74, January. [Downloadable!] (restricted)
  5. Ormerod, Paul, 1982. "Rational and Non-Rational Expectations of Inflation in Wage Equations for the United Kingdom," Economica, London School of Economics and Political Science, vol. 49(196), pages 375-87, November. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Robert Anderton & Ray Barrell, 1995. "The ERM and structural change in European labour markets: A study of 10 countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 131(1), pages 47-66, March. [Downloadable!] (restricted)
  2. Clemens Kool & Alex Lammertsma, 2005. "Inflation Persistence under Semi-Fixed Exchange Rate Regimes: The European Evidence 1974–1998," Open Economies Review, Springer, vol. 16(1), pages 51-76, January. [Downloadable!] (restricted)
  3. Marie Bessec, 2000. "Mean-Reversion versus PPP Adjustment: The Two Regimes of Exchange Rate Dynamics Under the EMS, 1979-1998," Econometric Society World Congress 2000 Contributed Papers 1305, Econometric Society. [Downloadable!]
  4. Nicholas Sarantis, Chris Stewart, 2000. "The ERM Effect, Conflict and Inflation in the European Union," International Review of Applied Economics, Taylor and Francis Journals, vol. 14(1), pages 25-43, January. [Downloadable!] (restricted)
  5. Robert Anderton, 1997. "Did the underlying behaviour of inflation change in the 1980s? A study of 17 countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 133(1), pages 22-38, March. [Downloadable!] (restricted)
  6. S. Zhou, 2003. "Evidence on the stationarity of ERM exchange rates," Applied Economics Letters, Taylor and Francis Journals, vol. 10(4), pages 231-233, March. [Downloadable!] (restricted)
  7. M. Demertzis & A. Hughes Hallett, 2000. "Wage Inflation and the Distribution of Output Gaps in Europe: Insiders vs. Outsiders," WO Research Memoranda (discontinued) 631, Netherlands Central Bank, Research Department.
    Other versions:
  8. Maria Demertzis & Andrew Hughes Hallett & Nicolien Schermer, 2008. "Europeanization or Globalization? Transnational Wage Bargaining and the Distribution of Activity in European Labor Markets," DNB Working Papers 186, Netherlands Central Bank, Research Department. [Downloadable!]
  9. G. Dufrenot & L. Mathieu & V. Mignon, & A. Peguin-Feissolle, 2002. "Persistent misalignments of the European exchange rates : some evidence from nonlinear cointegration," THEMA Working Papers 2002-29, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise. [Downloadable!]
    Other versions:
  10. Lucio Sarno, 2000. "Systematic sampling and real exchange rates," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(1), pages 24-57, March. [Downloadable!] (restricted)
  11. Laurence Boone, 1997. "Symmetry and Assymmetry of Supply and Demand Stocks in the European Union : a Dynamic Analysis," Working Papers 1997-03, CEPII research center. [Downloadable!]
  12. Guglielmo Caporale & Nikitas Pittis, 1995. "Inflation convergence in the EMS: Some additional evidence. A reply," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 131(3), pages 587-593, September. [Downloadable!] (restricted)
  13. Michael Artis & Wenda Zhang, 1998. "The linkage of interest rates within the EMS," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(1), pages 117-132, March. [Downloadable!] (restricted)
  14. Clemens J.M. Kool & Alex Lammertsma, 2003. "Inflation Persistence under Semi-Fixed Exchange Rate Regimes: The European Evidence 1974-1998," Working Papers 04-04, Utrecht School of Economics. [Downloadable!]
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