Persistent inflation differentials in Europe
This paper studies the recent empirical evidence available on the evolution of the real exchange rates within the main European economies in order to understand the possible main determinants of future inflation differentials within the EMU. The real exchange rate is decomposed into that of the traded sector and the differential across countries of the relative price of the non traded sector. Persistent deviations from PPP are found, also in the traded sector. It is also found that the main factor behind the annual bilateral real appreciation with respect to Germany since 1995 has been the differential growth of relative non traded prices across countries. In the case of France, that differential was mainly explained by a different growth of relative labor productivities in the two economies, while in the case of Spain and Italy it was mainly due to the different growth of relative non-traded markups and wages, respectively.
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- Matthew B. Canzoneri & Robert E. Cumby & Behzad Diba, 1996.
"Relative Labor Productivity and the Real Exchange Rate in the Long Run: Evidence for a Panel of OECD Countries,"
NBER Working Papers
5676, National Bureau of Economic Research, Inc.
- Canzoneri, Matthew B. & Cumby, Robert E. & Diba, Behzad, 1999. "Relative labor productivity and the real exchange rate in the long run: evidence for a panel of OECD countries," Journal of International Economics, Elsevier, vol. 47(2), pages 245-266, April.
- Canzoneri, Matthew B & Cumby, Robert & Diba, Behzad, 1996. "Relative Labour Productivity and the Real Exchange Rate in the Long Run: Evidence for a Panel of OECD Countries," CEPR Discussion Papers 1464, C.E.P.R. Discussion Papers.
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