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On the revelance and nature of regional inflation differentials: The case of Spain

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  • Enrique Alberola
  • José Manuel Maqués

Abstract

This paper studies two aspects of the behaviour of provincial relative prices in Spain: the relevance and the nature of provincial inflation divergences and relative price shifts. Inflation differentials are found to be small (the range is less than half point per year in the long-run), but deviations of relative prices from equilibrium can be very persistent.

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Paper provided by FEDEA in its series Studies on the Spanish Economy with number 35.

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Handle: RePEc:fda:fdaeee:35

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References

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  1. Alberola, Enrique & Tyrväinen, Timo, 1998. "Is There Scope for Inflation Differentials in EMU? An Empirical Evaluation of the Balassa-Samuelson Model in EMU Countries," Research Discussion Papers, Bank of Finland 15/1998, Bank of Finland.
  2. Stephen Cecchetti & Nelson C. Mark & Robert Sonora, 1999. "Price Level Convergence Among United States Cities: Lessons for the European Central Bank," Working Papers, Ohio State University, Department of Economics 99-01, Ohio State University, Department of Economics.
  3. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 34(2), pages 647-668, June.
  4. Sarno, Lucio & Taylor, Mark P, 1997. "The Behaviour of Real Exchange Rates During the Post-Bretton Woods Period," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1730, C.E.P.R. Discussion Papers.
  5. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0100, National Bureau of Economic Research, Inc.
  6. Matthew Canzoneri & Robert Cumby & Behzad Diba & Gwen Eudey, 1998. "Trends in European Productivity: Implications for Real Exchange Rates, Real Interest Rates and Inflation Differentials," Working Papers, Oesterreichische Nationalbank (Austrian Central Bank) 27, Oesterreichische Nationalbank (Austrian Central Bank).
  7. David C. Parsley & Shang-Jin Wei, 1996. "Convergence to the Law of One Price Without Trade Barriers or Currency Fluctuations," NBER Working Papers 5654, National Bureau of Economic Research, Inc.
  8. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 72, pages 584.
  9. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9526, Faculty of Economics, University of Cambridge.
  10. Rogers, John H. & Jenkins, Michael, 1995. "Haircuts or hysteresis? Sources of movements in real exchange rates," Journal of International Economics, Elsevier, Elsevier, vol. 38(3-4), pages 339-360, May.
  11. Bergstrand, Jeffrey H, 1991. "Structural Determinants of Real Exchange Rates and National Price Levels: Some Empirical Evidence," American Economic Review, American Economic Association, American Economic Association, vol. 81(1), pages 325-34, March.
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Cited by:
  1. I. Arnold & C.J.M. Kool, 2004. "The Role of Inflation Differentials in Regional Adjustment: Evidence from the United States," Working Papers, Utrecht School of Economics 04-13, Utrecht School of Economics.
  2. Alejandro Rodriguez Caro & Santiago Rodriguez Feijoó & Carlos Gonzalez Correa, 2005. "Markov Chain approach to Purchasing Power Convergence in the 15 European Union," ERSA conference papers ersa05p457, European Regional Science Association.
  3. Giorgio Canarella & Stephen Miller & Stephen Pollard, 2011. "The Global Financial Crisis and Stochastic Convergence in the Euro Area," International Advances in Economic Research, Springer, Springer, vol. 17(3), pages 315-333, August.
  4. Issing, Otmar, 2001. "The Single Monetary Policy of the European Central Bank: One Size Fits All," International Finance, Wiley Blackwell, Wiley Blackwell, vol. 4(3), pages 441-62, Winter.
  5. Fabio Busetti & Silvia Fabiani & Andrew Harvey, 2006. "Convergences of prices and rates of inflation," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 575, Bank of Italy, Economic Research and International Relations Area.
  6. Santiago Rodriguez Feijoo & Alejandro Rodriguez Caro & Carlos Gonzalez Correa, 2004. "An Empirical Study of the Purchasing Power Parity in the European Union," ERSA conference papers ersa04p369, European Regional Science Association.
  7. Andrea Vaona, 2006. "Merging the Purchasing Power Parity and the Phillips Curve Literatures: Regional Evidence from Italy," Working Papers, University of Verona, Department of Economics 33, University of Verona, Department of Economics.
  8. Ivo J.M. Arnold & Jan J.G. Lemmen, 2008. "Inflation Expectations and Inflation Uncertainty in the Eurozone: Evidence from Survey Data," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 144(2), pages 325-346, July.
  9. Patrick Honohan & Philip R. Lane, 2003. "Divergent inflation rates in EMU," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 18(37), pages 357-394, October.
  10. Carla Massidda & Paolo Mattana, 2008. "Regional productivity and relative prices dynamics: the case of Italy," The Annals of Regional Science, Springer, Springer, vol. 42(4), pages 945-966, December.
  11. Santiago Rodriguez Feijoo & Alejandro Rodriguez Caro & Carlos Gonzalez Correa, 2003. "A measurement to analyze the relative change in the Absolute Parity of Power Purchase: An application to the European Union," ERSA conference papers ersa03p163, European Regional Science Association.
  12. Maarten Hendrikx & Bryan Chapple, 2002. "Regional Inflation Divergence in the Context of EMU," MEB Series (discontinued), Netherlands Central Bank, Monetary and Economic Policy Department 2002-19, Netherlands Central Bank, Monetary and Economic Policy Department.
  13. Jacobo Campo Robledo & Sebastián Cubillos Fonseca, 2012. "Convergencia de precios en Colombia: integración de mercados a través del Índice de Precios al Consumidor," REVISTA FINANZAS Y POLÍTICA ECONÓMICA, UNIVERSIDAD CATOLICA DE COLOMBIA, UNIVERSIDAD CATOLICA DE COLOMBIA.

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