How wide are European borders? : On the integration effects of monetary unions

  • We use consumer price data for 81 European cities (in Germany, Austria, Finland, Italy, Spain, Portugal and Switzerland) to study the impact of the introduction of the euro on goods market integration. Employing both aggregated and disaggregated consumer price index (CPI) data we confirm previous results which showed that the distance between European cities explains a significant amount of the variation in the prices of similar goods in different locations. We also find that the variation of relative prices is much higher for two cities located in different countries than for two equidistant cities in the same country. Under the EMU, the elimination of nominal exchange rate volatility has largely reduced these border effects, but distance and border still matter for intra-European relative price volatility.

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Author:Axel A. Weber, Guenter Beck
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2001,07
Series (Serial Number):CFS working paper series (2001, 07 r)
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:EMU; border effects; goods market integration; law of one price; purchasing power parity; real exchange rates; relative price volatility
GND Keyword:Deutschland; Österreich; Schweiz; Italien; Spanien; Portugal; Verbraucherpreis; Europäische Union; Währungsunion
Issue:This Version: April 2003
First Version: January 2001 : "How Wide Are European Borders? New Evidence on the Integration Effects of Monetary Unions"
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht