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Inflation Differentials and Business Cycle Fluctuations in the European Monetary Union

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Author Info
Christian Proaño Acosta () (IMK at the Hans Boeckler Foundation, University of Bielefeld)

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Abstract

The high degree of persistence in the national inflation differentials of the majority of EMU Member States observed since the introduction of the euro has raised serious concerns among researchers and policy-makers alike. In this paper the main theoretical arguments which explain the existence of such inflation differentials within a monetary union are reviewed and, by means of econometric methods, their dynamic behaviour prior and after the introduction of the euro is analyzed. Furthermore, the empirical evidence for different degrees of correlation between the country-specific business cycles fluctuations and the arise of national inflation differentials with respect to the euro area average are investigated through single-equation GMM and panel TSLS estimations.

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Publisher Info
Paper provided by IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute in its series IMK Working Paper with number 05-2007.

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Length: 46 pages
Date of creation: Mar 2007
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Handle: RePEc:imk:wpaper:05-2007

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Related research
Keywords: Inflation differentials; convergence and stationary tests; GMM es- timation; Phillips Curve;

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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