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Regional Price Adjustment in a Monetary Union Author info | Abstract | Publisher info | Download info | Related research | Statistics Jan Marc Berk () (The Netherlands Bank, and Vrije Universiteit, Amsterdam)
Job Swank (The Netherlands Bank, Amsterdam, and Erasmus University Rotterdam)
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Using a New-Keynesian framework, we investigate how far the inflationary processes in member states of EMU cause regional price levels to converge. We fail to produce hard evidence of the present existence of such an adjustment mechanism, notwithstanding that inflation in some countries tends to converge towards the euro area level. Overa11, inflation persistence has declined significantly over the years, but there are still marked differences between countries on this score. We conclude that the euro area is not an optimal currency area yet, lending support to the quest for further structura1 reforms in European labour and product markets.
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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number
02-077/2.
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Date of creation: 01 Aug 2002Date of revision:
Handle: RePEc:dgr:uvatin:20020077Contact details of provider: Web page: http://www.tinbergen.nl/
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Keywords: Inflation EMU monetary policy. Find related papers by JEL classification: E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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