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Price convergence in Europe from a macro perspective: Trends and determinants (1960-2003)


  • Riemer P. Faber
  • Ad C.J. Stokman


This paper studies the effects of more than 40 years of European integration on prices. Up to now, most empirical research in this area has been micro-based. We follow a macro approach. On the basis of scaled HICP strong evidence is found for price convergence in Europe, especially in the 1960s and 1990s. For the DM zone convergence is found in all decades until the German re-unification. Next to cost convergence, trade and tax harmonization, we demonstrate that exchange rate stability has been an important factor behind this process.

Suggested Citation

  • Riemer P. Faber & Ad C.J. Stokman, 2004. "Price convergence in Europe from a macro perspective: Trends and determinants (1960-2003)," DNB Working Papers 012, Netherlands Central Bank, Research Department.
  • Handle: RePEc:dnb:dnbwpp:012

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    References listed on IDEAS

    1. John H. Rogers, 2002. "Monetary union, price level convergence, and inflation: how close is Europe to the United States?," International Finance Discussion Papers 740, Board of Governors of the Federal Reserve System (U.S.).
    2. John H. Rogers, 2001. "Price level convergence, relative prices, and inflation in Europe," International Finance Discussion Papers 699, Board of Governors of the Federal Reserve System (U.S.).
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    More about this item


    Economic integration; International price dispersions; Price convergence; Law of One Price; EMU; DM zone;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • F15 - International Economics - - Trade - - - Economic Integration
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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