Price Convergence under EMU? First Estimates
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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