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Regional Inflation Divergence in the Context of EMU

Author

Listed:
  • Maarten Hendrikx
  • Bryan Chapple

Abstract

We find that regional inflation dispersion has not markedly increased since the start of EMU, although it is somewhat higher than in other monetary unions (US and Germany), and that the distribution of member states' rates of inflation around the euro area HICP inflation rate is characterised by a few outliers. In addition, an analysis based on economic weights suggests that roughly 60 percent of euro area consumer spending experiences an inflation rate that is within a range of 0.5 percentage points of the euro area HICP inflation rate. This suggests that in the first three years since the start of EMU regional inflation dispersion has not posed problems for the adoption of the single monetary policy for the majority of member states.

Suggested Citation

  • Maarten Hendrikx & Bryan Chapple, 2002. "Regional Inflation Divergence in the Context of EMU," MEB Series (discontinued) 2002-19, Netherlands Central Bank, Monetary and Economic Policy Department.
  • Handle: RePEc:dnb:mebser:2002-19
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    File URL: https://www.dnb.nl/binaries/ms2002-19_tcm46-147329.pdf
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    References listed on IDEAS

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    1. Frederic S. Mishkin, 1999. "Global Financial Instability: Framework, Events, Issues," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 3-20, Fall.
    2. Enrique Alberola & JosÈ Manuel MaquÈs, "undated". "On the revelance and nature of regional inflation differentials: The case of Spain," Studies on the Spanish Economy 35, FEDEA.
    3. Stephen Cecchetti & Nelson C. Mark & Robert Sonora, 1999. "Price Level Convergence Among United States Cities: Lessons for the European Central Bank," Working Papers 99-01, Ohio State University, Department of Economics.
    4. Wynne, Mark A & Koo, Jahyeong, 2000. "Business Cycles under Monetary Union: A Comparison of the EU and US," Economica, London School of Economics and Political Science, vol. 67(267), pages 347-374, August.
    5. Michael Reutter & Hans-Werner Sinn, 2000. "The Minimum Inflation Rate for Euroland," CESifo Working Paper Series 377, CESifo Group Munich.
    6. Jan Marc Berk & Job Swank, 2002. "Regional Price Adjustment in a Monetary Union the Case of EMU," MEB Series (discontinued) 2002-7, Netherlands Central Bank, Monetary and Economic Policy Department.
    7. 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.).
    8. Mojon, Benoît & Kashyap, Anil K. & Angeloni, Ignazio & Terlizzese, Daniele, 2002. "Monetary Transmission in the Euro Area : Where Do We Stand?," Working Paper Series 0114, European Central Bank.
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    Cited by:

    1. Carlos J. Rodriguez-Fuentes & Antonio Olivera-Herrera & David Padron-Marrero, 2004. "Monetary policy and inflation persistence in the Eurozone," ERSA conference papers ersa04p218, European Regional Science Association.
    2. Giovanni Arese-Visconti, 2002. "Inflation Differentials before and after the EMU," Econometrics Working Papers Archive wp2002_19, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti".

    More about this item

    Keywords

    Regional economics; European Monetary Policy; European Monetary Union (EMU); Inflation;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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