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Relative Prices and Economic Adjustment in the U.S. and the EU: A Real Story About European Monetary Union

Author

Listed:
  • Mr. Alun H. Thomas
  • Mr. Tamim Bayoumi

Abstract

Structural vector autoregressions are used to analyze the relationship between real output and relative prices within the EU and the United States, Relative price variability appears to be more important for adjustment within the EU than the United States, reflecting the lower integration of goods and factor markets. In the absence of higher market integration, the lower relative price variability implied by the introduction of a single currency in the EU could well cause significant economic disruption.

Suggested Citation

  • Mr. Alun H. Thomas & Mr. Tamim Bayoumi, 1994. "Relative Prices and Economic Adjustment in the U.S. and the EU: A Real Story About European Monetary Union," IMF Working Papers 1994/065, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1994/065
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    Cited by:

    1. Patrick-Hervé Mbouombouo Mfossa, 2015. "GOUVERNANCE ECONOMIQUE ET STABILISATION DES CHOCS ASYMETRIQUES: Quel mécanisme pour une meilleure viabilité de la CEMAC ?," Working Papers hal-01213989, HAL.
    2. Jean Pisani-Ferry, 1994. "Union monétaire et convergence : qu'avons nous appris ?," Working Papers 1994-14, CEPII research center.
    3. Schor, Armand-Denis, 2000. "La théorie des zones monétaires optimales : l’optimum, le praticable, le crédible et le réel," L'Actualité Economique, Société Canadienne de Science Economique, vol. 76(4), pages 545-576, décembre.

    More about this item

    Keywords

    WP; nominal exchange rate; EU country; EU entrant; EU sample period; relative price; Relative prices; common currency; EMU; price response; EU result; EU goods; price movement; supply curve; EU country estimate; Exchange rates; Currencies; Monetary unions; Personal income; Structural vector autoregression; Europe;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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