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Dynamics and Factors of Inflation Convergence in the European Union

Listed author(s):
  • Vaclav Broz

    ()

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic
    Czech National Bank, Na Prikope 28, 115 03 Prague 1, Czech Republic)

  • Evzen Kocenda

    ()

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic
    CESifo, Munich
    IOS, Regensburg)

We provide comprehensive evidence of the widespread occurrence of inflation convergence between all countries of the European Union from 1999 to 2016. We also show that convergence was more inclusive in the years after the global financial crisis—including the European sovereign debt crisis and the period of zero lower bound—and that price-stabilityoriented monetary strategies might have in fact facilitated this convergence. Our results are robust with respect to the use of three inflation benchmarks (the cross-sectional average, the inflation target of the European Central Bank, and the Maastricht criterion), structural breaks, and a core inflation measure. Our main findings imply that further enlargement of the euro area is feasible from the perspective of the convergence of inflation rates between the countries of the European Union.

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File URL: http://ies.fsv.cuni.cz/sci/publication/show/id/5773/lang/en
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Paper provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its series Working Papers IES with number 2017/24.

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Length: 47 pages
Date of creation: Nov 2017
Date of revision: Nov 2017
Handle: RePEc:fau:wpaper:wp2017_24
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