Is Price Dynamics Homogeneous Across Eurozone Countries? |
David Guerreiro, 1 Marc Joëts, 1 Valérie Mignon, 2 |
1University of Paris Ouest, EconomiX-CNRS 2University of Paris Ouest, EconomiX-CNRS and CEPII |
Corresponding Author:
David Guerreiro ,Tel: +33 (0)1 40 97 58 60, Fax: +33 (0)1 40 97 77 84, Email: valerie.mignon@u-paris10.fr |
Copyright ©2012 The Journal of Economic Integration |
ABSTRACT |
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The aim of this paper is to investigate whether price dynamics is homogeneous across the Eurozone countries. Relying on monthly data over the January 1970~July 2011 period, we test for the absolute purchasing power parity (PPP) hypothesis through the implementation of second and third-generation panel unit root and cointegration tests. Our results show that price dynamics are heterogeneous depending on both the time period and the considered group of countries. More specifically, while PPP is validated for the core Economic Monetary Union (EMU) countries, this hypothesis does not hold for Northern peripheral economies. Turning to the Southern countries, PPP is observed only before the launch of the euro.
JEL Classification
C23: Models with Panel Data; Longitudinal Data; Spatial Time Series E31: Price Level; Inflation; Deflation F15: Economic Integration F41.: |
Keywords:
Price Convergence | Eurozone | Panel Unit Root Tests | Half-Life.
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