Inflation Differentials in EU New Member States: An Empirical Evidence
In this paper, we examine the determinants of inflation differentials in a panel of the newEuropean Union member states vis-à-vis the euro area in 1997-2007. Our main results are as follows. Exchange rate appreciation and higher price level in the new EU members is associated with narrower inflation differential vis-à-vis the euro area, while fiscal deficit and positive output gap seem to contribute to higher inflation differential. Nevertheless, the effect of price convergence on inflation differentials is found to be dominating in these countries suggesting that a country with price level 20% below the euro area average is likely to exhibit inflation nearly one percentage point above the euro area. Overall, our results indicate that real convergence factors rather than cyclical variation are more important for inflation developments in the new EU members, as compared to the euro area.
|Date of creation:||01 Oct 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 734 763-5020
Fax: 734 763-5850
Web page: http://www.wdi.umich.edu
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Angeloni, Ignazio & Ehrmann, Michael, 2004.
"Euro area inflation differentials,"
Working Paper Series
0388, European Central Bank.
- Balázs Égert & László Halpern & Ronald MacDonald, 2005.
"Equilibrium Exchange Rates in T ransition Economies: T aking Stock of the Issues,"
106, Oesterreichische Nationalbank (Austrian Central Bank).
- Balázs �gert & László Halpern & Ronald MacDonald, 2006. "Equilibrium Exchange Rates in Transition Economies: Taking Stock of the Issues ," Journal of Economic Surveys, Wiley Blackwell, vol. 20(2), pages 257-324, 04.
- Balázs Égert, & László Halpern & Ronald MacDonald, 2005. "Equilibrium Exchange Rates in Transition Economies: Taking Stock of the Issues," William Davidson Institute Working Papers Series wp793, William Davidson Institute at the University of Michigan.
- Égert, Balázs & Halpern, László & MacDonald, Ronald, 2004. "Equilibrium Exchange Rates in Transition Economies: Taking Stock of the Issues," CEPR Discussion Papers 4809, C.E.P.R. Discussion Papers.
- Hofmann, Boris & Remsperger, Hermann, 2005. "Inflation differentials among the Euro area countries: Potential causes and consequences," Journal of Asian Economics, Elsevier, vol. 16(3), pages 403-419, June.
- Ashoka Mody & Franziska Ohnsorge, 2007. "Can Domestic Policies Influence Inflation?," IMF Working Papers 07/257, International Monetary Fund.
- Philip R. Lane, & Patrick Honohan, 2003.
"Divergent Inflation Rates in EMU,"
The Institute for International Integration Studies Discussion Paper Series
- BalÃ¡zs Ã?gert, 2007. "Real Convergence, Price Level Convergence and Inflation in Europe," Working Papers 267, Bruegel.
- Balázs Egert, 2007.
"Real Convergence, Price Level Convergence and Inflation Differentials in Europe,"
CESifo Working Paper Series
2127, CESifo Group Munich.
- Balazs Egert, 2007. "Real Convergence, Price Level Convergence and Inflation Differentials in Europe," William Davidson Institute Working Papers Series wp895, William Davidson Institute at the University of Michigan.
- Balázs Égert, 2007. "Real Convergence, Price Level Convergence and Inflation Differentials in Europe," Working Papers 138, Oesterreichische Nationalbank (Austrian Central Bank).
- BalÃ¡zs Ã‰gert, 2008. "Prices and Price Convergence in Emerging Europe: an Overview," National Institute Economic Review, National Institute of Economic and Social Research, vol. 204(1), pages 66-84, April.
- Jarko Fidrmuc & Iikka Korhonen, 2006.
"Meta-Analysis of the Business Cycle Correlation between the Euro Area and the CEECs,"
CESifo Working Paper Series
1693, CESifo Group Munich.
- Fidrmuc, Jarko & Korhonen, Iikka, 2006. "Meta-analysis of the business cycle correlation between the euro area and the CEECs," Journal of Comparative Economics, Elsevier, vol. 34(3), pages 518-537, September.
- Patrick Honohan & Philip R. Lane, 2003. "Divergent inflation rates in EMU," Economic Policy, CEPR;CES;MSH, vol. 18(37), pages 357-394, October.
- Filippo Altissimo & Pierpaolo Benigno & Diego Rodriguez Palenzuela, 2005.
"Long-Run Determinants of Inflation Differentials in a Monetary Union,"
NBER Working Papers
11473, National Bureau of Economic Research, Inc.
- Altissimo, Filippo & Benigno, Pierpaolo & Rodriguez Palenzuela, Diego, 2005. "Long-Run Determinants of Inflation Differentials in a Monetary Union," CEPR Discussion Papers 5149, C.E.P.R. Discussion Papers.
When requesting a correction, please mention this item's handle: RePEc:wdi:papers:2008-937. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laurie Gendron)
If references are entirely missing, you can add them using this form.