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Regional price adjustment in a monetary union: the case of EMU

Author

Listed:
  • Berk, J.M

    (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics)

  • Swank, J.

Abstract

Using a New-Keynesian framework, we investigate how far the inflationary processes in member states of EMU cause regional price levels to converge. We fail to produce hard evidente of the present existence of such an adjustment mechanism, not-withstanding that inflation in some countries tends to converge towards the euro area level. Overall, inflation persistence has declined significantly over the years, but there are still marked differences between countries on this score. We conclude that the euro area is not an optimal currency area yet, lending support to the quest for further structural reforms in European labour and product markets.

Suggested Citation

  • Berk, J.M & Swank, J., 2002. "Regional price adjustment in a monetary union: the case of EMU," Serie Research Memoranda 0016, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    • Handle: RePEc:vua:wpaper:2002-16
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    File URL: http://degree.ubvu.vu.nl/repec/vua/wpaper/pdf/20020016.pdf
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    Citations

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    Cited by:

    1. Ivo J.M. Arnold & Jan J.G. Lemmen, 2008. "Inflation Expectations and Inflation Uncertainty in the Eurozone: Evidence from Survey Data," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(2), pages 325-346, July.
    2. Giorgio Canarella & Stephen Miller & Stephen Pollard, 2011. "The Global Financial Crisis and Stochastic Convergence in the Euro Area," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 17(3), pages 315-333, August.
    3. Garcia-Hiernaux, Alfredo & Gonzalez-Perez, Maria T. & Guerrero, David E., 2023. "Eurozone prices: A tale of convergence and divergence," Economic Modelling, Elsevier, vol. 126(C).
    4. I. Arnold & C.J.M. Kool, 2004. "The Role of Inflation Differentials in Regional Adjustment: Evidence from the United States," Working Papers 04-13, Utrecht School of Economics.
    5. Mrs. Hanan Morsy & Ms. Florence Jaumotte, 2012. "Determinants of Inflation in the Euro Area: The Role of Labor and Product Market Institutions," IMF Working Papers 2012/037, International Monetary Fund.
    6. repec:kap:iaecre:v:17:y:2011:i:3:p:315-333 is not listed on IDEAS
    7. Andersson, Malin & Masuch, Klaus & Schiffbauer, Marc, 2009. "Determinants of inflation and price level differentials across the euro area countries," Working Paper Series 1129, European Central Bank.
    8. Alfredo García Hiernaux & David Esteban Guerrero Burbano, 2015. "Price-Level Convergence in the Eurozone," Documentos de Trabajo del ICAE 2015-05, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    9. Constantinos Alexiou, 2011. "When the Bough Breaks Making Sense of the Greek Economic Waterloo'," International Journal of Economics and Financial Issues, Econjournals, vol. 1(3), pages 123-132, September.
    10. Arnold, Ivo J.M. & Soederhuizen, Beau, 2016. "Internal or external devaluation? What does the EC Consumer Survey tell us about macroeconomic adjustment in the Euro area?," Journal of International Money and Finance, Elsevier, vol. 64(C), pages 88-103.

    More about this item

    Keywords

    Inflation; EMU; monetary policy;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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