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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 evidente of the present existence of such an adjustment mechanism, not-withstanding that inflation in some countries tends to converge towards the euro area level. Overall, 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 structural reforms in European labour and product markets.

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File URL: ftp://zappa.ubvu.vu.nl/20020016.pdf
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Bibliographic Info

Paper provided by VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics in its series Serie Research Memoranda with number 0016.

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Date of creation: 2002
Date of revision:
Handle: RePEc:dgr:vuarem:2002-16

Contact details of provider:
Web page: http://www.feweb.vu.nl

Related research

Keywords: Inflation; EMU; monetary policy;

Other versions of this item:

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

This paper has been announced in the following NEP Reports:

• NEP-ALL-2002-08-19 (All new papers)
• NEP-EEC-2002-08-19 (European Economics)
• NEP-IFN-2002-08-19 (International Finance)

References

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Citations

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Cited by:

1. Ivo J.M. Arnold & Jan J.G. Lemmen, 2008. "Inflation Expectations and Inflation Uncertainty in the Eurozone: Evidence from Survey Data," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 144(2), pages 325-346, July.
   
   • Ivo J. M. Arnold & Jan J.G. Lemmen, 2006. "Inflation Expectations and Inflation Uncertainty in the Eurozone: Evidence from Survey Data," CESifo Working Paper Series 1667, CESifo Group Munich.
2. Giorgio Canarella & Stephen M. Miller & Stephen K. Pollard, 2010. "Stochastic Convergence in the Euro Area," Working papers 2010-32, University of Connecticut, Department of Economics.
   
   • Giorgio Canarella & Stephen Miller & Stephen Pollard, 2011. "The Global Financial Crisis and Stochastic Convergence in the Euro Area," International Advances in Economic Research, Springer, vol. 17(3), pages 315-333, August.
   • Giorgio Canarella & Stephen M. Miller & Stephen K. Pollard, 2011. "Stochastic Convergence in the Euro Area," Working Papers 1102, University of Nevada, Las Vegas , Department of Economics.
3. Constantinos Alexiou, 2011. "“When the Bough Breaks” Making Sense of the Greek Economic ‘Waterloo’," International Journal of Economics and Financial Issues, Econjournals, vol. 1(3), pages 123-132, September.
4. Hanan Morsy & Florence Jaumotte, 2012. "Determinants of Inflation in the Euro Area: The Role of Labor and Product Market Institutions," IMF Working Papers 12/37, International Monetary Fund.
5. Malin Andersson & Klaus Masuch & Marc Schiffbauer, 2009. "Determinants of inflation and price level differentials across the euro area countries," Working Paper Series 1129, European Central Bank.

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