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Regional price adjustment in a monetary union: the case of EMU

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Author Info
Berk, J.M (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics)
Swank, J.

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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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Publisher 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
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Handle: RePEc:dgr:vuarem:2002-16

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Related research
Keywords: Inflation; EMU; monetary policy;

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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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  3. Aksoy, Yunus & De Grauwe, Paul & Dewachter, Hans, 2002. "Do asymmetries matter for European monetary policy?," European Economic Review, Elsevier, vol. 46(3), pages 443-469, March. [Downloadable!] (restricted)
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  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. [Downloadable!] (restricted)
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