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Does the Dispersion of Unit Labor Cost Dynamics in the EMU Imply Long-run Divergence? Results from a Comparison with the United States of America and Germany

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  • Sebastian Dullien

    ()
    (Financial Times Deutschland)

  • Ulrich Fritsche

    ()
    (Department for Economics and Politics, University of Hamburg, and DIW Berlin)

Abstract

Using unit labor cost (ULC) data from Euro area countries as well as US States and German Laender we investigate inflation convergence using different approaches, namely panel unit root tests, cointegration tests and error-correction models. All in all we cannot reject convergence of ULC growth in EMU, however, country-specific deviations from the rest of the currency union are more pronounced in Europe and more persistent. This holds before and after the introduction of the common currency.

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File URL: http://www.wiso.uni-hamburg.de/repec/hepdoc/macppr_2_2007.pdf
File Function: First version, 2007
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Bibliographic Info

Paper provided by Hamburg University, Department Wirtschaft und Politik in its series Macroeconomics and Finance Series with number 200702.

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Length: 37 pages
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:hep:macppr:200702

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Web page: http://www.wiso.uni-hamburg.de/dwp
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Keywords: Unit labor costs; inflation; EMU; convergence; panel unit root tests; convergence clubs;

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Cited by:
  1. Ulrich Fritsche & Vladimir Kuzin, 2011. "Analysing convergence in Europe using the non-linear single factor model," Empirical Economics, Springer, vol. 41(2), pages 343-369, October.
  2. Herbert S. Buscher & Hubert Gabrisch, 2009. "Is the European Monetary Union an Endogenous Currency Area? The Example of the Labor Markets," IWH Discussion Papers 7, Halle Institute for Economic Research.
  3. repec:hal:cesptp:halshs-00140529 is not listed on IDEAS
  4. Helmut Herwartz & Florian Siedenburg, 2013. "To converge or not converge: unit labor cost inflation in the Euro area," Empirical Economics, Springer, vol. 44(2), pages 455-467, April.
  5. Francesca Pancotto & Filippo Pericoli, 2011. "Till Labor Cost Do Us Part A Vecm Model of Unit Labor Cost Convergence in the Euro Area," Working Papers 14, Doctoral School of Economics, Sapienza University of Rome, revised 2011.

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