Real Convergence, Price Level Convergence and Inflation Differentials in Europe PDF Download
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Author: Balázs Égert
Publisher:
ISBN:
Category : Housing
Languages : en
Pages : 54
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Book Description
Author: Balázs Égert
Publisher:
ISBN:
Category : Housing
Languages : en
Pages : 54
Get Book Here
Book Description
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: John H. Rogers
Publisher:
ISBN:
Category : Convergence (Economics)
Languages : en
Pages : 48
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Book Description
"If price levels are initially different across the euro area, convergence to a common level of prices would imply that inflation will be higher in countries where prices are initially low. Price level convergence thus provides a potential explanation for recent cross-country differences in European inflation, a worrisome development under the ECBs "one-size-fits-all" monetary policy. I present direct evidence on price level convergence in Europe, using a unique data set, and then investigate how much of the recent divergence of national inflation rates can be explained by price level convergence. I show that between 1990 and 1999 prices did become less dispersed in the euro area. Convergence is especially evident for traded goods, and more in the first half of the 1990s than the second half. By some measures, traded goods price dispersion across the euro area is now close to that across U.S. cities. Despite an on-going process of convergence, deviations from the law of one price are large. Finally, I find a statistically-significant and robust negative relationship between the 1999 price level and 2000 inflation rate in Europe, and that the contribution of price level convergence to explaining inflation differentials is often quite important economically. Still, factors other than price convergence explain most of the cross-country inflation differences."
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages : 54
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Author: Luisa Lambertini
Publisher:
ISBN:
Category : Foreign exchange
Languages : en
Pages : 32
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Author: Leon Podkaminer
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
A cross-country regression relating the relative price level to the relative GDP level is statistically significant and stable over time. Price and GDP levels for EU member countries tend to gravitate to that line. The conclusion that there is a shorter-term trade-off between fast real convergence and low inflation is unwarranted. Higher inflation is not a necessary companion of fast convergence. Giving up national currency, or pegging it to the euro, may prevent real convergence or precipitate divergence. A weak initial price level may be insufficient. While retaining national currency is not risk-free, it allows a corrective devaluation.
Author:
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Category :
Languages : en
Pages :
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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: Nils Björkstén
Publisher:
ISBN:
Category : Convergence (Economics)
Languages : en
Pages : 42
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Author: John Harold Rogers
Publisher:
ISBN:
Category : Convergence (Economics)
Languages : en
Pages : 58
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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.
