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Regional Price Adjustment in a Monetary Union

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Author Info
Jan Marc Berk () (The Netherlands Bank, and Vrije Universiteit, Amsterdam)
Job Swank (The Netherlands Bank, Amsterdam, and Erasmus University Rotterdam)

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Abstract

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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Publisher Info
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 2002
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Handle: RePEc:dgr:uvatin:20020077

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Web page: http://www.tinbergen.nl/

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Related research
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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References listed on IDEAS
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Cited by:
(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. Maarten Hendrikx & Bryan Chapple, 2002. "Regional Inflation Divergence in the Context of EMU," MEB Series (discontinued) 2002-19, Netherlands Central Bank, Monetary and Economic Policy Department. [Downloadable!]
  2. Ivo J.M. Arnold & Clemens J.M. Kool, 2003. "The Role of Inflation Differentials in Regional Adjustment: Evidence from the United States," Working Papers 04-13, Utrecht School of Economics. [Downloadable!]
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