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Price Convergence under EMU? First Estimates

  • Lutz, Matthias

    (University of St Gallen)

This paper examines whether European monetary union has lowered the degree of price dispersion among member countries. A number of different estimation methods are applied to four independent datasets containing prices of identical goods. While the results reported in the paper vary somewhat across goods, they provide little overall support of the European Commission's claim that the single currency would significantly deepen market integration among the euro-zone countries. Even though this should be viewed as preliminary evidence, it does suggest that there are other, more important impediments to market integration in the EU.

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Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 143.

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Date of creation: 04 Jun 2003
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Handle: RePEc:ecj:ac2003:143
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  1. Ong, Li Lian, 1997. "Burgernomics: the economics of the Big Mac standard," Journal of International Money and Finance, Elsevier, vol. 16(6), pages 865-878, December.
  2. Charles Engel & John H. Rogers, 1995. "How wide is the border?," International Finance Discussion Papers 498, Board of Governors of the Federal Reserve System (U.S.).
  3. Jacques Melitz, 2003. "Geography, Trade and Currency Union," Working Papers 2003-25, Centre de Recherche en Economie et Statistique.
  4. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
  5. Friberg, Richard, 2001. "Two monies, two markets?: Variability and the option to segment," Journal of International Economics, Elsevier, vol. 55(2), pages 317-327, December.
  6. Matthias Lutz, 2002. "Beyond Burgernomics and MacParity: Exchange Rate Forecasts Based on the Law of One Price," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 D4-1, International Conferences on Panel Data.
  7. Slaughter, Matthew J., 2001. "Trade liberalization and per capita income convergence: a difference-in-differences analysis," Journal of International Economics, Elsevier, vol. 55(1), pages 203-228, October.
  8. Frondel, Manuel & Schmidt, Christoph M., 2001. "Evaluating environmental programs: the perspective of modern evaluation research," ZEW Discussion Papers 01-59, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  9. Ernst Fehr & Jean-Robert Tyran, 2000. "Does Money Illusion Matter?," IEW - Working Papers 045, Institute for Empirical Research in Economics - University of Zurich.
  10. Alan M. Taylor, 2000. "A Century of Purchasing-Power Parity," NBER Working Papers 8012, National Bureau of Economic Research, Inc.
  11. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
  12. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 7-46, 04.
  13. Matthias Lutz, 2004. "Pricing in Segmented Markets, Arbitrage Barriers, and the Law of One Price: Evidence from the European Car Market," Review of International Economics, Wiley Blackwell, vol. 12(3), pages 456-475, 08.
  14. Matthias Lutz, 2000. "EU Commission versus Volkswagen: New Evidence on Price Differentiation in the European Car Market," Review of Industrial Organization, Springer, vol. 17(3), pages 313-323, November.
  15. Torsten Persson, 2001. "Currency unions and trade: how large is the treatment effect?," Economic Policy, CEPR;CES;MSH, vol. 16(33), pages 433-462, October.
  16. Michael R. Pakko & Patricia S. Pollard, 1996. "For here or to go? Purchasing power parity and the Big Mac," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 3-22.
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