This paper studies the effects of more than 40 years of European integration on prices. Up to now, most empirical research in this area has been micro-based. We follow a macro approach. On the basis of scaled HICP strong evidence is found for price convergence in Europe, especially in the 1960s and 1990s. For the DM zone convergence is found in all decades until the German re-unification. Next to cost convergence, trade and tax harmonization, we demonstrate that exchange rate stability has been an important factor behind this process.
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Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number
012.
Find related papers by JEL classification: E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General F15 - International Economics - - Trade - - - Economic Integration F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
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