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Euro Area Product Market Integration

Author

Listed:
  • Krištić Irena Raguž

    (PhD, Associate professor, Faculty of Economics and Business Zagreb, J. F. Kennedy Square 6, 10000 Zagreb, Croatia)

  • Dumančić Lucija Rogić

    (PhD, Associate professor, Faculty of Economics and Business Zagreb, Croatia)

Abstract

The goal of this paper is to determine if there is product market integration in the euro area (EA). The paper employs LM and RALS-LM unit root tests with two breaks on the relative price series, constructed using the seasonally adjusted monthly Harmonized Index of Consumer Prices (HICP), from 1996:01 to 2017:05. The analysis shows EA-accession related breaks in price series for most of the EA11 countries, but, apart from Malta, no such breaks for the later-EA-joiners. However, there are breaks in both EA and non-EA countries at the time of EA formation. There is also evidence of greater product market integration and less adverse effects after negative shocks in the EA12. However, unit root analysis points to a conclusion that EA membership is not a sufficient condition for product market integration and integration is not necessarily related to being an EA member.

Suggested Citation

  • Krištić Irena Raguž & Dumančić Lucija Rogić, 2022. "Euro Area Product Market Integration," South East European Journal of Economics and Business, Sciendo, vol. 17(2), pages 142-153, December.
    • Handle: RePEc:vrs:seejeb:v:17:y:2022:i:2:p:142-153:n:7
    DOI: 10.2478/jeb-2022-0020
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    References listed on IDEAS

    as
    1. Miriam Camarero & Vicente Esteve & Cecilio Tamarit, 2000. "Price convergence of peripheral European countries on the way to the EMU: A time series approach," Empirical Economics, Springer, vol. 25(1), pages 149-168.
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    Cited by:

    1. Efendic Adnan, 2022. "Editorial," South East European Journal of Economics and Business, Sciendo, vol. 17(2), pages 1-1, December.

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    More about this item

    Keywords

    prices; euro area; stochastic convergence; unit root; structural breaks;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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