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Adjustment in EMU: Is Convergence Assured?

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Author Info
Sebastian Dullien () (HTW Berlin -- University of Applied Sciences)
Ulrich Fritsche () (Department for Socioeconomics, Department for Economics, University of Hamburg)
Ingrid Groessl () (Department for Socioeconomics, Department for Economics, University of Hamburg)
Michael Paetz () (Department for Economics, University of Hamburg)

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Abstract

Using a modified version of the model presented by Belke and Gros (2007), we analyze the stability of adjustment in a currency union. Using econometric estimates for parameter values we check the stability conditions for the 11 original EMU countries and Greece. We found significant instability in the model for a large number of countries. We then simulate the adjustment process for some empirically observed parameter values and find that even for countries with relatively smooth adjustment, the adjustment to a price shock in EMU might take several decades.

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File URL: http://www.wiso.uni-hamburg.de/hepdoc/macppr_7_2009.pdf
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File Function: First version, 2009
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Publisher Info
Paper provided by Hamburg University, Department Wirtschaft und Politik in its series Macroeconomics and Finance Series with number 200907.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 36 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:hep:macppr:200907

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Web page: http://www.wiso.uni-hamburg.de/dwp
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Related research
Keywords: EMU; convergence; stability; inflation;

Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions

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References listed on IDEAS
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.:
  1. Ignazio Angeloni & Michael Ehrmann, 2004. "Euro area inflation differentials," Working Paper Series 388, European Central Bank. [Downloadable!]
    Other versions:
  2. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January. [Downloadable!] (restricted)
  3. Philip R. Lane, 2006. "The Real Effects of EMU," The Institute for International Integration Studies Discussion Paper Series iiisdp115, IIIS. [Downloadable!]
    Other versions:
  4. Luis J. Álvarez & Emmanuel Dhyne & Marco Hoeberichts & Claudia Kwapil & Hervé Le Bihan & Patrick Lünnemann & Fernando Martins & Roberto Sabbatini & Harald Stahl & Philip Vermeulen & Jouko Vilmunen, 2006. "Sticky Prices in the Euro Area: A Summary of New Micro-Evidence," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 575-584, 04-05. [Downloadable!] (restricted)
    Other versions:
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