Inflation convergence after the introduction of the Euro

  • Using the Johansen test for cointegration, we examine to which extent inflation rates in the Euro area have converged after the introduction of a single currency. Since the assumption of non-stationary variables represents the pivotal point in cointegration analyses we pay special attention to the appropriate identification of non-stationary inflation rates by the application of six different unit root tests. We compare two periods, the first ranging from 1993 to 1998 and the second from 1993 to 2002 with monthly observations. The Johansen test only finds partial convergence for the former period and no convergence for the latter.

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Author:Markus Mentz, Steffen P. Sebastian
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2003,30
Series (Serial Number):CFS working paper series (2003, 30)
Document Type:Working Paper
Year of Completion:2003
Year of first Publication:2003
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/06/13
Tag:Cointegration; Inflation convergence; Unit root
GND Keyword:Europäische Union; Inflationsrate; Währungsunion; Inflation
Issue:October 2003
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:C Mathematical and Quantitative Methods / C3 Multiple or Simultaneous Equation Models / C32 Time-Series Models; Dynamic Quantile Regressions (Updated!)
Licence (German):License LogoDeutsches Urheberrecht