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Does the Dispersion of Unit Labor Cost Dynamics in the EMU Imply Long-Run Divergence? : Results from a Comparison with the United States of America and Germany

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Author Info
Sebastian Dullien
Ulrich Fritsche

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Abstract

Using unit labor cost (ULC) data from Euro area countries as well as US States and German Länder we investigate inflation convergence using different approaches, namely panel unit root tests, co-integration tests and error-correction models. All in all we cannot reject convergence of ULC growth in EMU, however, country-specific deviations from the rest of the currency union are more pronounced in Europe and more persistent. This holds before and after the introduction of the common currency.

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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 674.

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Length: 38 p.
Date of creation: 2007
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Handle: RePEc:diw:diwwpp:dp674

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Keywords: Unit labor costs inflation EMU convergence panel unit root tests convergence clubs

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Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models

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