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Author:
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Languages : en
Pages :
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Book Description
In this paper, we examine the determinants of inflation differentials in a panel of the new European 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. -- inflation differentials ; price convergence ; exchange rate ; New EU members ; panel data
Author:
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Category :
Languages : en
Pages :
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Book Description
In this paper, we examine the determinants of inflation differentials in a panel of the new European 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. -- inflation differentials ; price convergence ; exchange rate ; New EU members ; panel data
Author: Ronald MacDonald
Publisher:
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Category :
Languages : en
Pages :
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Book Description
We propose an alternative explanation for the nature, sources and consequences of inflation rate differentials in a monetary union, such as the euro area. We build on the new neoclassical synthesis (NNS) framework, recently advanced by Goodfriend (2002) and Goodfriend and King (2000). Based on the NNS setup, we discuss the inflationary consequences of the catching-up process in a heterogeneous monetary union. In particular, we explore the interaction between catching-up and inflation differentials and offer an interpretation of the nature of this interaction. We demonstrate that divergent inflation rates between Member States do not necessarily have to be an equilibrium phenomenon, even if the original shock comes from the supply-side of the economy. Second, we show how such divergence of individual country's inflation rates may arise when countries differ in size and in trend productivity growth.
Author: Ronald MacDonald
Publisher:
ISBN:
Category :
Languages : en
Pages : 31
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Book Description
In this paper we propose an alternative explanation for the nature, sources and consequences of inflation rate differentials in a monetary union, such as EMU. To achieve this, we build on the new neoclassical synthesis (NNS) framework, recently advanced by Goodfriend (2002) and Goodfriend and King (2000). Based on the NNS setup, we discuss the inflationary consequences of the catching-up process in a heterogeneous monetary union. In particular, we explore the interaction between catching-up and inflation differentials and offer an interpretation of the nature of this interaction. Our discussion is in stark contrast to the conventional Balassa-Samuelson (BS) interpretation. In particular, we demonstrate that divergent inflation rates between Member States do not necessarily have to be an equilibrium phenomenon, even if the original shock comes from the supply-side of the economy. Second, we show how a centralized monetary policy may produce such divergence of individual country's inflation rates when countries differ in size and in trend productivity growth. Against this background, we additionally show how the catching up may potentially lead to unsustainable credit booms in a catching-up member country. Finally, we indicate some important deficiencies of the BS model as a guide to short- and medium-run policy making analysis.
Author: Nada Choueiri
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 46
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Book Description
This paper explores inflation determinants within the EU and implications for new members' euro adoption plans. Factor analysis partitions observed inflation in EU25 countries into common-origin and country-specific (idiosyncratic) components. Cross-country differences in common-origin inflation within the EU are found to depend on gaps in the initial price level, changes in the nominal effective exchange rate, the quality of institutions, and the economy's flexibility. Idiosyncratic inflation is generally small in magnitude. Nonetheless, the results show that country-specific shocks have systematically pushed down headline inflation, potentially influencing the assessment of compliance with the Maastricht inflation criterion.
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ISBN: 9789276616474
Category :
Languages : en
Pages : 0
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Book Description
This note analyses inflation and competitiveness developments in selected EU countries, as input to the 2023 In-Depth Reviews under the Macroeconomic Imbalance Procedure. It aims to provide the analytical basis for the assessment of potential imbalances linked to competitiveness for Czechia, Estonia, Hungary, Latvia, Lithuania, Romania and Slovakia.1 These countries were selected after the first screening for imbalances in the 2023 Alert Mechanism Report on the basis of the evolution of their rates of inflation, unit labour costs and real effective exchange rates. Out of these Member States, only Romania has been considered to experience an imbalance in the 2022 assessment. This note considers the impact of common factors affecting inflation differentials and competitiveness, particularly of commodity price developments, to provide context to the forthcoming In-Depth Reviews under the Macroeconomic Imbalance Procedure. The analysis to anticipate the evolution of potential risks by relying on the most recent data and available forecasts, and places recent developments in the context of changes that have taken place within and before the pandemic period.2 The analysis provided is not exhaustive. At the time of publication of the In-Depth Reviews, more up to date data will inform the assessments that will be made, and the existence or not of imbalances will take on board developments across countries' economies and additional country-specific factors. Since 2019, the EU economies have been faced with a combination of supply and demand shocks that have affected both relative prices and inflation. Throughout the pandemic and after, various bottlenecks have constrained supply. At the same time, containment measures during the acute phase of the pandemic and uncertainty constrained demand, particularly for contact intensive services, affecting relative prices. In the recovery phase, the rapid surge in demand, while supply was still facing constraints, pushed prices up. Price pressures for energy and commodities, but especially for natural gas, were aggravated significantly by Russia's invasion of Ukraine and the disruption of supplies, particularly to Europe.
Author:
Publisher:
ISBN:
Category : European Economic Community countries
Languages : en
Pages : 168
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Book Description
The workshop discussed cross-country and quantitative analyses of the determinants of inflation in the NMS, focusing in particular on three broad questions: (i) to assess the relative importance of external versus domestic drivers of inflation; (i) to study the relative importance of catching-up and transition-related inflation; (iii) to examine the role of macroeconomic and structural policies in determining the dynamics of inflation in NMS.
Author: Ronald MacDonald
Publisher:
ISBN:
Category :
Languages : en
Pages : 26
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Book Description
In this paper we propose an alternative explanation for the nature, sources and consequences of inflation rate differentials in a monetary union, such as EMU. To achieve this, we build on the new neoclassical synthesis (NNS) framework, recently advanced by Goodfriend (2002) and Goodfriend and King (2000). Based on the NNS setup, we discuss the inflationary consequences of the catching-up process in a heterogeneous monetary union. In particular, we explore the interaction between catching-up and inflation differentials and offer an interpretation of the nature of this interaction. Our discussion is in stark contrast to the conventional Balassa-Samuelson (BS) interpretation. In particular, we demonstrate that divergent inflation rates between Member States do not necessarily have to be an equilibrium phenomenon, even if the original shock comes from the supply-side of the economy. Second, we show how a centralized monetary policy may produce such divergence of individual country's inflation rates when countries differ in size and in trend productivity growth. Against this background, we additionally show how the catching may potentially lead to unsustainable credit booms in a catching-up member country. Finally, we indicate some important deficiencies of the BS model as a guide to short- and medium-run policy making analysis.
Author: Reiner Martin
Publisher: Palgrave MacMillan
ISBN:
Category : Business & Economics
Languages : en
Pages : 232
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Book Description
"Real convergence has gained substantial momentum in central, eastern and south-eastern Europe. Countries in these regions are all involved in the European integration process, either as recently joined EU member states, candidate countries, or potential candidates for membership. It has therefore become increasingly important to consider methods of catching up, to explore cross-country differences and to review key policy challenges for the convergence process. Through considering these issues in detail, prospects for future adoption of the euro can also be assessed. This book brings together policymakers, high-level practitioners, academics, and experts from central banks and international institutions in order to explore the key policy challenges facing the convergence process. Contributions focus especially on inflation, growth, migration and the balance of payments. This book is an essential read for all scholars interested in the transition of central, eastern and south-eastern Europe, and in the process of EU integration and enlargement."--Book cover.
Author: Luigi Bernardi
Publisher: Routledge
ISBN: 1134270739
Category : Business & Economics
Languages : en
Pages : 227
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Book Description
Building on the work carried out in the 2004 Routledge book, Tax Systems and Tax Reforms in Europe, an international team of contributors now turn their attention to the new EU member states. The book compares conditions in the new and potential EU Member states to those in the long-standing EU countries. Topics covered include: * A Comparative View of Taxation in the EU and in New Members * Tax Policy in EU New Members * Tax Policy in New Members under the Stability Pact * Tax Administration and the Black Economy. As well as investigating countries such as the Czech Republic, Estonia and the Baltics, Hungary, Poland and Slovenia, this outstanding book contains a foreword by Vito Tanzi and will be a valuable resource for postgraduates and professionals in the fields of economics, politics, finance and European studies.
Author: Mr.Jeffrey R. Franks
Publisher: International Monetary Fund
ISBN: 1484338499
Category : Business & Economics
Languages : en
Pages : 47
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Book Description
We examine economic convergence among euro area countries on multiple dimensions. While there was nominal convergence of inflation and interest rates, real convergence of per capita income levels has not occurred among the original euro area members since the advent of the common currency. Income convergence stagnated in the early years of the common currency and has reversed in the wake of the global economic crisis. New euro area members, in contrast, have seen real income convergence. Business cycles became more synchronized, but the amplitude of those cycles diverged. Financial cycles showed a similar pattern: sychronizing more over time, but with divergent amplitudes. Income convergence requires reforms boosting productivity growth in lagging countries, while cyclical and financial convergence can be enhanced by measures to improve national and euro area fiscal policies, together with steps to deepen the single market.
