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Regional Inflation Divergence in the Context of EMU

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  • Maarten Hendrikx
  • Bryan Chapple
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    Abstract

    We find that regional inflation dispersion has not markedly increased since the start of EMU, although it is somewhat higher than in other monetary unions (US and Germany), and that the distribution of member states' rates of inflation around the euro area HICP inflation rate is characterised by a few outliers. In addition, an analysis based on economic weights suggests that roughly 60 percent of euro area consumer spending experiences an inflation rate that is within a range of 0.5 percentage points of the euro area HICP inflation rate. This suggests that in the first three years since the start of EMU regional inflation dispersion has not posed problems for the adoption of the single monetary policy for the majority of member states.

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    File URL: http://www.dnb.nl/binaries/ms2002-19_tcm46-147329.pdf
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    Bibliographic Info

    Paper provided by Netherlands Central Bank, Monetary and Economic Policy Department in its series MEB Series (discontinued) with number 2002-19.

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    Date of creation: Nov 2002
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    Handle: RePEc:dnb:mebser:2002-19

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    Related research

    Keywords: Regional economics; European Monetary Policy; European Monetary Union (EMU); Inflation;

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    References

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    1. Hans-Werner Sinn & Michael Reutter, 2001. "The Minimum Inflation Rate for Euroland," NBER Working Papers 8085, National Bureau of Economic Research, Inc.
    2. Mojon, Benoît & Kashyap, Anil K. & Angeloni, Ignazio & Terlizzese, Daniele, 2002. "Monetary Transmission in the Euro Area : Where Do We Stand?," Working Paper Series 0114, European Central Bank.
    3. Wynne, Mark A & Koo, Jahyeong, 2000. "Business Cycles under Monetary Union: A Comparison of the EU and US," Economica, London School of Economics and Political Science, vol. 67(267), pages 347-74, August.
    4. Stephen Cecchetti & Nelson C. Mark & Robert Sonora, 1999. "Price Level Convergence Among United States Cities: Lessons for the European Central Bank," Working Papers 99-01, Ohio State University, Department of Economics.
    5. Jan Marc Berk & Job Swank, 2002. "Regional Price Adjustment in a Monetary Union," Tinbergen Institute Discussion Papers 02-077/2, Tinbergen Institute.
    6. Enrique Alberola & José Manuel Maqués, . "On the revelance and nature of regional inflation differentials: The case of Spain," Studies on the Spanish Economy 35, FEDEA.
    7. Frederic S. Mishkin, 1999. "Global Financial Instability: Framework, Events, Issues," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 3-20, Fall.
    8. John H. Rogers, 2001. "Price level convergence, relative prices, and inflation in Europe," International Finance Discussion Papers 699, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:
    1. Carlos J. Rodriguez-Fuentes & Antonio Olivera-Herrera & David Padron-Marrero, 2004. "Monetary policy and inflation persistence in the Eurozone," ERSA conference papers ersa04p218, European Regional Science Association.
    2. Giovanni Arese-Visconti, 2002. "Inflation Differentials before and after the EMU," Econometrics Working Papers Archive wp2002_19, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti".

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