Determinants of inflation and price level differentials across the euro area countries
AbstractThis 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
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European Central Bank in its series Working Paper Series with number 1129.
Date of creation: Dec 2009
Date of revision:
Contact details of provider:
Postal: Postfach 16 03 19, Frankfurt am Main, Germany
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/home/html/index.en.html
More information through EDIRC
Postal: Press and Information Division, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- F2 - International Economics - - International Factor Movements and International Business
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-30 (All new papers)
- NEP-CBA-2010-01-30 (Central Banking)
- NEP-EEC-2010-01-30 (European Economics)
- NEP-MAC-2010-01-30 (Macroeconomics)
- NEP-MON-2010-01-30 (Monetary Economics)
- NEP-OPM-2010-01-30 (Open Economy Macroeconomic)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Emil Stavrev, 2007. "Growth and Inflation Dispersions in EMU: Reasons, the Role of Adjustment Channels, and Policy Implications," IMF Working Papers 07/167, International Monetary Fund.
- Ivo Arnold & Bastiaan Verhoef, 2004. "External causes of Euro zone inflation differentials," Intereconomics: Review of European Economic Policy, Springer, vol. 39(5), pages 254-263, September.
- Bergstrand, Jeffrey H, 1991. "Structural Determinants of Real Exchange Rates and National Price Levels: Some Empirical Evidence," American Economic Review, American Economic Association, vol. 81(1), pages 325-34, March.
- Ball, Laurence & Mankiw, N Gregory, 1994.
"Asymmetric Price Adjustment and Economic Fluctuations,"
Royal Economic Society, vol. 104(423), pages 247-61, March.
- Laurence Ball & N. Gregory Mankiw, 1994. "Asymmetric Price Adjustment and Economic Fluctuations," NBER Working Papers 4089, National Bureau of Economic Research, Inc.
- Ball, L. & Mankiw, N.G., 1992. "Asymmetric Price Adjustment and Economic Fluctuations," Harvard Institute of Economic Research Working Papers 1602, Harvard - Institute of Economic Research.
- Hans-Werner Sinn & Michael Reutter, 2001.
"The Minimum Inflation Rate for Euroland,"
NBER Working Papers
8085, National Bureau of Economic Research, Inc.
- Canzoneri, Matthew, et al, 2002. "Productivity Trends in Europe: Implications for Real Exchange Rates, Real Interest Rates, and Inflation," Review of International Economics, Wiley Blackwell, vol. 10(3), pages 497-516, August.
- BalÃ¡zs Ã?gert, 2007. "Real Convergence, Price Level Convergence and Inflation in Europe," Working Papers 267, Bruegel.
- Jordi Galí & Mark Gertler, 1998.
"Inflation dynamics: A structural econometric analysis,"
Economics Working Papers
341, Department of Economics and Business, Universitat Pompeu Fabra.
- Gali, Jordi & Gertler, Mark, 1999. "Inflation dynamics: A structural econometric analysis," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 195-222, October.
- Jordi Gali & Mark Gertler, 2000. "Inflation Dynamics: A Structural Econometric Analysis," NBER Working Papers 7551, National Bureau of Economic Research, Inc.
- Égert, Balázs & Halpern, László & MacDonald, Ronald, 2004.
"Equilibrium Exchange Rates in Transition Economies: Taking Stock of the Issues,"
CEPR Discussion Papers
4809, C.E.P.R. Discussion Papers.
- Halpern, László & MacDonald, Ronald & Égert, Balázs, 2005. "Equilibrium Exchange Rates in T ransition Economies: T aking Stock of the Issues," Working Papers 106, Oesterreichische Nationalbank (Austrian Central Bank).
- Balázs Égert, & László Halpern & Ronald MacDonald, 2005. "Equilibrium Exchange Rates in Transition Economies: Taking Stock of the Issues," William Davidson Institute Working Papers Series wp793, William Davidson Institute at the University of Michigan.
- Patrick Honohan & Philip R. Lane, 2003.
"Divergent inflation rates in EMU,"
CEPR & CES & MSH, vol. 18(37), pages 357-394, October.
- Philip R. Lane & Patrick Honohan, 2003. "Divergent Inflation Rates in EMU," Trinity Economics Papers 20034, Trinity College Dublin, Department of Economics.
- Philip R. Lane, & Patrick Honohan, 2003. "Divergent Inflation Rates in EMU," The Institute for International Integration Studies Discussion Paper Series iiisdp05, IIIS.
- Angeloni Ignazio & Ehrmann Michael, 2007.
"Euro Area Inflation Differentials,"
The B.E. Journal of Macroeconomics,
De Gruyter, vol. 7(1), pages 1-36, August.
- Richard Blundell & Stephen Bond, 2000.
"GMM Estimation with persistent panel data: an application to production functions,"
Taylor & Francis Journals, vol. 19(3), pages 321-340.
- Richard Blundell & Steve Bond, 1999. "GMM estimation with persistent panel data: an application to production functions," IFS Working Papers W99/04, Institute for Fiscal Studies.
- Bhagwati, Jagdish N, 1984. "Why Are Services Cheaper in the Poor Countries?," Economic Journal, Royal Economic Society, vol. 94(374), pages 279-86, June.
- George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
- Arellano, Manuel & Bond, Stephen, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(2), pages 277-97, April.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Irving B. Kravis & Robert E. Lipsey, 1982. "Towards an Explanation of National Price Levels," NBER Working Papers 1034, National Bureau of Economic Research, Inc.
- Egert, Balazs, 2002. "Estimating the impact of the Balassa-Samuelson effect on inflation and the real exchange rate during the transition," Economic Systems, Elsevier, vol. 26(1), pages 1-16, April.
- Berk, J.M & Swank, J., 2002.
"Regional price adjustment in a monetary union: the case of EMU,"
Serie Research Memoranda
0016, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
- Jan Marc Berk & Job Swank, 2002. "Regional Price Adjustment in a Monetary Union the Case of EMU," MEB Series (discontinued) 2002-7, Netherlands Central Bank, Monetary and Economic Policy Department.
- Fischer, Christoph, 2007. "An assessment of the trends in international price competitiveness among EMU countries," Discussion Paper Series 1: Economic Studies 2007,08, Deutsche Bundesbank, Research Centre.
- 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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Official Publications).
If references are entirely missing, you can add them using this form.