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Convergence to Purchasing Power Parity at the Commencement of the Euro

  • Claude Lopez

    (University of Cincinnati)

  • David H. Papell

    (University of Houston)

We investigate convergence towards Purchasing Power Parity (PPP) within the Euro Zone and between the Euro Zone and its main partners using panel data methods that incorporate serial and contemporaneous correlation. We find strong rejections of the unit root hypothesis, and therefore evidence of PPP, in the Euro Zone for different numeraire currencies, as well as in the Euro Zone plus the United States, with the US dollar as the numeraire currency, starting between 1996 and 1999. The process of convergence towards PPP, however, begins earlier, generally in 1992 or 1993 following the adoption of the Maastricht Treaty.

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File URL: http://128.118.178.162/eps/mac/papers/0310/0310008.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 0310008.

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Length: 19 pages
Date of creation: 08 Oct 2003
Date of revision:
Handle: RePEc:wpa:wuwpma:0310008
Note: Type of Document - Acrobat PDF; prepared on PC; to print on A4 ; pages: 19; figures: included
Contact details of provider: Web page: http://128.118.178.162

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