The paper presents empirical results on an import prices equation to the case of the small open Hellenic economy, during her course to the European Monetary Union, in the 1980s until mid-1990s. The analysis employs cointegration theory to examine the long-run co-movements of prices, effective exchange rate of GRD and unit labour cost of the European countries, which export to Greece. Innovation accounting is also used so as to detect the dynamics of the data set. We found slight evidence to support long run equilibrium, however, it was only the Hellenic inflation rate, which was adjusting to the deviations from this. The fragile stability of the system is confirmed by the impulse response functions examination where the exchange rate of the GRD do not converge to its long-run values, even after a 3 years period from the one unit-shock in various innovations. The determinant role of the growth rate of the unit labour cost and therefore of European countries’ prices to the exchange rate of GRD, to the Hellenic inflation rate, and less to the growth rate of the import prices is (1) justified by its high proportion to their variance decomposition and (2) became apparent approximately after 9 months. The latter seems to amount to the “contract-period” in the Magee’s terminology.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Length: 14 pages Date of creation: 20 May 2005 Date of revision: Handle: RePEc:wpa:wuwpif:0505013
Note: Type of Document - pdf; pages: 14. The paper is published from the 'European Research Studies Journal', in 2000, vol. III, Iss.(1-2), pp.105-121. Contact details of provider: Web page: http://129.3.20.41
For technical questions regarding this item, or to correct its listing, contact: (EconWPA).
Find related papers by JEL classification: F3 - International Economics - - International Finance F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
This paper has been announced in the following NEP Reports:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Sims, Christopher A, 1980.
"Macroeconomics and Reality,"
Econometrica,
Econometric Society, vol. 48(1), pages 1-48, January.
[Downloadable!] (restricted)