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Divergent Inflation Rates in EMU

  • Philip R. Lane
  • Patrick Honohan

We analyse the sources of divergent national inflation rates among EMU member countries. At one level, we review the Irish 'outlier' experience; at another, we estimate panel regressions for the 1999-2001 period. We highlight the role played by differential exposure to euro exchange rate movements in explaining inflation divergence. In addition, we find evidence that ouput gaps and a "price level convergence" effect have also been important. We draw some policy conclusions for the accession countries that are hoping to join EMU.

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Paper provided by Trinity College Dublin, Department of Economics in its series Trinity Economics Papers with number 20034.

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Date of creation: 2003
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Handle: RePEc:tcd:tcduee:20034
Contact details of provider: Postal: Trinity College, Dublin 2
Phone: (+ 353 1) 6081325
Fax: 6772503
Web page: http://www.tcd.ie/Economics/

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