This paper focuses on macroeconomic interdependencies among the euro area member countries over the period 1984-2002. The theoretical framework builds on the generalized purchasing power parity hypothesis, which is empirically tested using vector error correction models with broken deterministic components. The euro area turns out to be an integrated entity, even if national economies still exhibit a certain degree of heterogeneity. The results also suggest that up to now the “euro-effect” in fostering integration within the euro area has been quite weak.
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Paper provided by ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY) in its series ISAE Working Papers with number
57.
Find related papers by JEL classification: C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
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