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Panel data evidence on inflation convergence in the European Union


  • Mark Holmes


This letter investigates the extent of long-run inflation convergence among the major EU economies using panel data unit root and cointegration tests. Potentially, these methods have key advantages over time-series methods which, in the light of limited data, can suffer from power deficiency with a tendency to accept the null of nonstationarity or noncointegration. Using monthly inflation data over the period 1972-99, this study finds that inflation convergence was strongest during 1983-90 whereas the turbulence experienced within in the ERM in the early 1990s conferred some degree of macroeconomic independence among EU members.

Suggested Citation

  • Mark Holmes, 2002. "Panel data evidence on inflation convergence in the European Union," Applied Economics Letters, Taylor & Francis Journals, vol. 9(3), pages 155-158.
  • Handle: RePEc:taf:apeclt:v:9:y:2002:i:3:p:155-158 DOI: 10.1080/13504850110054940

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    References listed on IDEAS

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    Cited by:

    1. Joseph Byrne & Norbert Fiess, 2010. "Euro area inflation: aggregation bias and convergence," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 146(2), pages 339-357, June.
    2. repec:agr:journl:v:4(613):y:2017:i:4(613):p:43-52 is not listed on IDEAS
    3. Hassler Uwe & Demetrescu Matei, 2005. "Spurious Persistence and Unit Roots due to Seasonal Differencing: The Case of Inflation Rates / Künstliche Persistenz und Einheitswurzeln infolge saisonaler Differenzen: Das Beispiel Inflationsraten," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 225(4), pages 413-426, August.
    4. Terence D. Agbeyegbe, 2008. "On the feasibility of a monetary union in the Southern Africa Development Community," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(2), pages 150-157.
    5. Giannellis, Nikolaos, 2013. "Asymmetric behavior of inflation differentials in the euro area: Evidence from a threshold unit root test," Research in Economics, Elsevier, vol. 67(2), pages 133-144.
    6. Angelos Liontakis & Dimitris Kremmydas, 2013. "Food Inflation in EU: Distribution Analysis and Spatial Effects," Working Papers 2013-3, Agricultural University of Athens, Department Of Agricultural Economics.
    7. Hasan Engin Duran, 2015. "Regional Inflation Convergence In Turkey," Working Papers 2015/10, Turkish Economic Association.
    8. Burcu Ozcan, 2014. "Do Tourism Markets Of Turkey Converge?," Proceedings of International Academic Conferences 0200630, International Institute of Social and Economic Sciences.
    9. Mentz, Markus & Sebastian, Steffen P., 2003. "Inflation convergence after the introduction of the Euro," CFS Working Paper Series 2003/30, Center for Financial Studies (CFS).
    10. Narayan, Paresh Kumar & Narayan, Seema & Smyth, Russell, 2008. "Are oil shocks permanent or temporary? Panel data evidence from crude oil and NGL production in 60 countries," Energy Economics, Elsevier, vol. 30(3), pages 919-936, May.
    11. Aslan, Alper, 2008. "Türkiye’de Suç Oranları Sürekliliğinin Analizi," MPRA Paper 10610, University Library of Munich, Germany.
    12. Mihaela Simionescu, 2014. "A Comparative Analysis Of Real And Predicted Inflation Convergence In Cee Countries During The Economic Crisis," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 6(2), pages 142-155, July.
    13. Syed Basher & Joakim Westerlund, 2007. "Is there really a unit root in the inflation rate? More evidence from panel data models," Applied Economics Letters, Taylor & Francis Journals, vol. 15(3), pages 161-164.
    14. Juan Carlos Cuestas & Luis A. Gil-Alana & Karl Taylor, 2012. "Inflation convergence in Central and Eastern Europe with a view to adopting the euro," Working Papers 12-01, Asociación Española de Economía y Finanzas Internacionales.
    15. Emmanuel Anoruo & Vasudeva N.R. Murthy, 2014. "Testing Nonlinear Inflation Convergence for the Central African Economic and Monetary Community," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 1-7.
    16. Nagayasu, Jun, 2012. "Regional inflation and industrial structure in monetary union," MPRA Paper 37310, University Library of Munich, Germany.
    17. Kristian Jonsson, 2006. "Time-specific disturbances and cross-sectional dependency in a small-sample heterogeneous panel data unit root test," Applied Economics, Taylor & Francis Journals, vol. 38(11), pages 1309-1317.
    18. Giulio PALOMBA & Emma SARNO & Alberto ZAZZARO, 2007. "Testing similarities of short-run inflation dynamics among EU countries after the Euro," Working Papers 289, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    19. Yilmazkuday, Hakan, 2009. "Inflation Targeting and Inflation Convergence within Turkey," MPRA Paper 16770, University Library of Munich, Germany.
    20. Jorge M. L. G. Andraz & Paulo M.M. Rodrigues, 2015. "A Reappraisal of Eurozone Countries Output Differentials," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
    21. Tirtosuharto, Darius & Adiwilaga, Handri, 2013. "Decentralization and Regional Inflation in Indonesia," MPRA Paper 70691, University Library of Munich, Germany.
    22. Mihaela Simionescu, 2015. "The Impact Of Economic Crisis On Inflation Convergence In The European Union. A Panel Data Approach," Journal Articles, Center For Economic Analyses, pages 37-46, June.

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