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Does the Dispersion of Unit Labor Cost Dynamics in the EMU Imply Long-run Divergence? Results from a Comparison with the United States of America and Germany

  • Sebastian Dullien

    ()

    (Financial Times Deutschland)

  • Ulrich Fritsche

    ()

    (Department for Economics and Politics, University of Hamburg, and DIW Berlin)

Using unit labor cost (ULC) data from Euro area countries as well as US States and German Laender we investigate inflation convergence using different approaches, namely panel unit root tests, cointegration tests and error-correction models. All in all we cannot reject convergence of ULC growth in EMU, however, country-specific deviations from the rest of the currency union are more pronounced in Europe and more persistent. This holds before and after the introduction of the common currency.

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File URL: http://www.wiso.uni-hamburg.de/repec/hepdoc/macppr_2_2007.pdf
File Function: First version, 2007
Download Restriction: no

Paper provided by Hamburg University, Department Wirtschaft und Politik in its series Macroeconomics and Finance Series with number 200702.

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Length: 37 pages
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:hep:macppr:200702
Contact details of provider: Web page: http://www.wiso.uni-hamburg.de/dwp

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