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Determinants of inflation and price level differentials across the euro area countries

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  • Andersson, Malin
  • Masuch, Klaus
  • Schiffbauer, Marc
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    Abstract

    This paper analyses the determinants of inflation differentials and price levels across the euro area countries. Dynamic panel estimations for the period 1999-2006 show that inflation differentials are primarily determined by cyclical positions and inflation persistence. The persistence in inflation differentials appears to be partly explained by administered prices and to some extent by product market regulations. In a cointegrating framework we find that the price level of each euro area country is governed by the levels of GDP per capita. JEL Classification: E32, E52, E43, F2

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    Paper provided by European Central Bank in its series Working Paper Series with number 1129.

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    Date of creation: Dec 2009
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    Handle: RePEc:ecb:ecbwps:20091129
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    Keywords: convergence; inflation differentials; Inflation persistence; price level;

    Find related papers by JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F2 - International Economics - - International Factor Movements and International Business

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    Cited by:

    1. Harald Hau & Sandy Lai, 2013. "Asset Allocation and Monetary Policy: Evidence from the Eurozone," Working Papers 222013, Hong Kong Institute for Monetary Research.
    2. Brämer, Patrick & Gischer, Horst & Richter, Toni & Weiß, Mirko, 2013. "Competition in banks’ lending business and its interference with ECB monetary policy," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 25(C), pages 144-162.
    3. International Monetary Fund, 2011. "Spain; Selected Issues," IMF Staff Country Reports 11/216, International Monetary Fund.

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