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Determinants of inflation and price level differentials across the euro area countries

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  • Andersson, Malin
  • Masuch, Klaus
  • Schiffbauer, Marc
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    Abstract

    This paper analyses the determinants of inflation differentials and price levels across the euro area countries. Dynamic panel estimations for the period 1999-2006 show that inflation differentials are primarily determined by cyclical positions and inflation persistence. The persistence in inflation differentials appears to be partly explained by administered prices and to some extent by product market regulations. In a cointegrating framework we find that the price level of each euro area country is governed by the levels of GDP per capita. JEL Classification: E32, E52, E43, F2

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    Bibliographic Info

    Paper provided by European Central Bank in its series Working Paper Series with number 1129.

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    Date of creation: Dec 2009
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    Handle: RePEc:ecb:ecbwps:20091129

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    Keywords: convergence; inflation differentials; Inflation persistence; price level;

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    1. Angeloni, Ignazio & Ehrmann, Michael, 2004. "Euro area inflation differentials," Working Paper Series 0388, European Central Bank.
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    Cited by:
    1. Brämer, Patrick & Gischer, Horst & Richter, Toni & Weiß, Mirko, 2013. "Competition in banks’ lending business and its interference with ECB monetary policy," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 25(C), pages 144-162.

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