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Inflation Convergence over Time: Sector-Level Evidence within Europe

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  • Hakan Yilmazkuday

    (Department of Economics, Florida International University)

Abstract

This paper investigates inflation convergence among European countries by using sector-level data for the period between 1997:M1 and 2019:M12. Panel unit root tests at the country-sector level are conducted by using moving windows, which is useful for analyzing changes in inflation convergence and the corresponding speed of convergence over time. The results suggest that there is evidence for inflation convergence for the majority of sectors within Europe, although certain countries have experienced disruptions, especially during the 2008 financial crisis. Regarding the speed of inflation convergence, the average half-life across European countries decreased from about 15 months to about 8 months during the sample period. Important sector-level implications follow for European Union (EU) candidate countries and non-euro EU member countries in regard to the Maastricht Treaty.

Suggested Citation

  • Hakan Yilmazkuday, 2022. "Inflation Convergence over Time: Sector-Level Evidence within Europe," Working Papers 2201, Florida International University, Department of Economics.
    • Handle: RePEc:fiu:wpaper:2201
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Inflation Convergence; Half-Life; Sector-Level Analysis; European Union; Euro Area;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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