IDEAS home Printed from https://ideas.repec.org/p/wdi/papers/2005-768.html
   My bibliography  Save this paper

Testing for inflation convergence between the Euro Zone and its CEE partners

Author

Listed:
  • Imed Drine
  • Christophe Rault

Abstract

We investigate inflation convergence between the Euro Zone and its CEE partners using panel data methods that incorporate structural shifts. We find strong rejections of the unit root hypothesis, and therefore evidence of PPP, in the East-European countries for the 1995:1 to 2000:4 period.

Suggested Citation

  • Imed Drine & Christophe Rault, 2005. "Testing for inflation convergence between the Euro Zone and its CEE partners," William Davidson Institute Working Papers Series wp768, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:2005-768
    as

    Download full text from publisher

    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/40154/3/wp768.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(3), pages 597-625, June.
    2. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    3. Sarno,Lucio & Taylor,Mark P., 2003. "The Economics of Exchange Rates," Cambridge Books, Cambridge University Press, number 9780521485845.
    4. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "A panel project on purchasing power parity: Mean reversion within and between countries," Journal of International Economics, Elsevier, vol. 40(1-2), pages 209-224, February.
    5. Amsler, Christine & Lee, Junsoo, 1995. "An LM Test for a Unit Root in the Presence of a Structural Change," Econometric Theory, Cambridge University Press, vol. 11(2), pages 359-368, February.
    6. Robin L. Lumsdaine & David H. Papell, 1997. "Multiple Trend Breaks And The Unit-Root Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 212-218, May.
    7. Froot, Kenneth A. & Rogoff, Kenneth, 1995. "Perspectives on PPP and long-run real exchange rates," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 32, pages 1647-1688, Elsevier.
    8. Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
    9. Peter Pedroni, 2000. "Fully Modified OLS for Heterogeneous Cointegrated Panels," Department of Economics Working Papers 2000-03, Department of Economics, Williams College.
    10. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    11. G. M. Grossman & K. Rogoff (ed.), 1995. "Handbook of International Economics," Handbook of International Economics, Elsevier, edition 1, volume 3, number 3.
    12. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    13. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 653-670, November.
    14. Maddala, G S & Wu, Shaowen, 1999. "A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-652, Special I.
    15. McCoskey, Suzanne & Kao, Chihwa, 1999. "Testing the Stability of a Production Function with Urbanization as a Shift Factor," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 671-690, Special I.
    16. O'Connell, Paul G. J., 1998. "The overvaluation of purchasing power parity," Journal of International Economics, Elsevier, vol. 44(1), pages 1-19, February.
    17. Junsoo Lee & Mark Strazicich, 2001. "Testing the null of stationarity in the presence of a structural break," Applied Economics Letters, Taylor & Francis Journals, vol. 8(6), pages 377-382.
    18. G. S. Maddala & Shaowen Wu, 1999. "A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 631-652, November.
    19. Pedroni, Peter, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-670, Special I.
    20. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    21. Suzanne McCoskey & Chihwa Kao, 1999. "Testing the Stability of a Production Function with Urbanization as a Shift Factor," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 671-690, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. António Afonso & Christophe Rault, 2010. "What do we really know about fiscal sustainability in the EU? A panel data diagnostic," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(4), pages 731-755, January.
    2. Jorge Carrera & Romain Restout, 2008. "Long Run Determinants of Real Exchange Rates in Latin America," Post-Print halshs-00276402, HAL.
    3. Bhatt Hakhu, Antra & Piergallini, Alessandro & Scaramozzino, Pasquale, 2014. "Public Capital Expenditure and Debt Dynamics: Evidence from the European Union," MPRA Paper 62827, University Library of Munich, Germany.
    4. Breitung, Jörg & Pesaran, Mohammad Hashem, 2005. "Unit roots and cointegration in panels," Discussion Paper Series 1: Economic Studies 2005,42, Deutsche Bundesbank.
    5. Roberto Basile & Mauro Costantini & Sergio Destefanis, 2005. "Unit root and cointegration tests for cross-sectionally correlated panels. Estimating regional production functions," CELPE Discussion Papers 94, CELPE - CEnter for Labor and Political Economics, University of Salerno, Italy.
    6. Karikallio, Hanna, 2015. "Cross-commodity Price Transmission and Integration of the EU Livestock Market of Pork and Beef: Panel Time-series Approach," 2015 Conference, August 9-14, 2015, Milan, Italy 211832, International Association of Agricultural Economists.
    7. Österholm, Pär, 2004. "Estimating the Relationship between Age Structure and GDP in the OECD Using Panel Cointegration Methods," Working Paper Series 2004:13, Uppsala University, Department of Economics.
    8. Imed Drine & Christophe Rault, 2008. "Purchasing Power Parity For Developing And Developed Countries. What Can We Learn From Non‐Stationary Panel Data Models?," Journal of Economic Surveys, Wiley Blackwell, vol. 22(4), pages 752-773, September.
    9. BADALYAN, Gohar & HERZFELD, Thomas & RAJCANIOVA, Miroslava, 2014. "Transport Infrastructure And Economic Growth: Panel Data Approach For Armenia, Georgia And Turkey," Review of Agricultural and Applied Economics (RAAE), Faculty of Economics and Management, Slovak Agricultural University in Nitra, vol. 17(2), pages 1-10, October.
    10. Karmaker, Shamal Chandra & Hosan, Shahadat & Chapman, Andrew J. & Saha, Bidyut Baran, 2021. "The role of environmental taxes on technological innovation," Energy, Elsevier, vol. 232(C).
    11. Hamit-Haggar, Mahamat, 2012. "Greenhouse gas emissions, energy consumption and economic growth: A panel cointegration analysis from Canadian industrial sector perspective," Energy Economics, Elsevier, vol. 34(1), pages 358-364.
    12. Carlos Alberto Barreto Nieto & Jacobo Campo Robledo, 2012. "Relación a largo plazo entre consumo de energía y PIB en América Latina: Una evaluación empírica con datos panel," Revista Ecos de Economía, Universidad EAFIT, October.
    13. David Greasley & Les Oxley, 2010. "Cliometrics And Time Series Econometrics: Some Theory And Applications," Journal of Economic Surveys, Wiley Blackwell, vol. 24(5), pages 970-1042, December.
    14. Kuan‐Min Wang, 2010. "Monetary Policy Impulses and Retail Interest Rate Pass‐Through in Asian Banking Markets," Asian Economic Journal, East Asian Economic Association, vol. 24(3), pages 253-287, September.
    15. Acikgoz, Senay & Ben Ali, Mohamed Sami, 2019. "Where does economic growth in the Middle Eastern and North African countries come from?," The Quarterly Review of Economics and Finance, Elsevier, vol. 73(C), pages 172-183.
    16. Pedro Teles & Harald Uhlig & João Valle e Azevedo, 2016. "Is Quantity Theory Still Alive?," Economic Journal, Royal Economic Society, vol. 126(591), pages 442-464, March.
    17. El-Shazly, Alaa, 2013. "Electricity demand analysis and forecasting: A panel cointegration approach," Energy Economics, Elsevier, vol. 40(C), pages 251-258.
    18. Dobnik, Frauke, 2011. "Energy Consumption and Economic Growth Revisited: Structural Breaks and Cross-section Dependence," Ruhr Economic Papers 303, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    19. Juan Carlos Aquino & N. R. Ramírez-Rondán, 2020. "Estimating factor shares from nonstationary panel data," Empirical Economics, Springer, vol. 58(5), pages 2353-2380, May.
    20. Porras, María Sylvina & Martín-Román, Ángel L., 2017. "Self-employment and Okun’s Law relationship: the Spanish case," GLO Discussion Paper Series 157, Global Labor Organization (GLO).

    More about this item

    Keywords

    Purchasing power parity; inflation convergence; developing country; panel unit-root tests allowing structural breaks;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F0 - International Economics - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wdi:papers:2005-768. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: WDI (email available below). General contact details of provider: https://edirc.repec.org/data/wdumius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.