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Price Level Convergence in Europe: Did the Introduction of the Euro Matter?

Author

Listed:
  • Jesús Crespo Cuaresma

    (Vienna University of Economics and Business, Institute for Fiscal and Monetary Policy)

  • Balázs Égert

    (Oesterreichische Nationalbank)

  • Maria Antoinette Silgoner

    (Oesterreichische Nationalbank)

Abstract

Several theoretical arguments suggest that price level divergence across EU countries has diminished in the course of the European integration process as a result of both product market integration and the introduction of the common currency. In this paper, we empirically assess this hypothesis for the euro area countries and a group of control countries since 1990, using price level data on over 160 products and services in 27 European cities. Our conclusions confirm that price convergence took place at the beginning of the 1990s. There is, however, not much evidence that the introduction of the single currency has led to a further narrowing of price differentials. In fact, price dispersion has remained remarkably stable in recent years, whereas it has increased slightly since 2003 in the control group.

Suggested Citation

  • Jesús Crespo Cuaresma & Balázs Égert & Maria Antoinette Silgoner, 2007. "Price Level Convergence in Europe: Did the Introduction of the Euro Matter?," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 100-113.
    • Handle: RePEc:onb:oenbmp:y:2007:i:1:b:5
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    File URL: https://www.oenb.at/dam/jcr:90fa1bb1-d2df-437b-9963-36b8abf5554b/mop_2007_q1_in_focus_04_tcm16-56383.pdf
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    Citations

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    Cited by:

    1. Tomás Slacík, 2008. "(How) Will the Euro Affect Inflation in the Czech Republic? A contribution to the current debate," FIW Working Paper series 018, FIW.
    2. Cerasa, Andrea & Buscaglia, Daniela, 2019. "A hedonic model of import steel prices: Is the EU market integrated?," Resources Policy, Elsevier, vol. 61(C), pages 241-249.
    3. Friedrich Fritzer, 2012. "Price Level Convergence Before and After the Advent of EMU," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 105-116.
    4. Nagayasu, Jun, 2012. "Regional inflation and industrial structure in monetary union," MPRA Paper 37310, University Library of Munich, Germany.
    5. Ulrich Fritsche & Vladimir Kuzin, 2011. "Analysing convergence in Europe using the non-linear single factor model," Empirical Economics, Springer, vol. 41(2), pages 343-369, October.
    6. Luca Macedoni, 2021. "Has the Euro Shrunk the Band? Relative Purchasing Power Parity Convergence in a Currency Union," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(2), pages 593-620, April.
    7. Fischer, Christoph, 2012. "Price convergence in the EMU? Evidence from micro data," European Economic Review, Elsevier, vol. 56(4), pages 757-776.
    8. Barbara Köttl & Juliane Dittrich & Jaroslav Dokoupil & Alena Matuskova & Jutta Roosen, 2009. "Verbraucherschutz im Grenzgebiet: eine Befragung deutscher und tschechischer Konsumenten," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 78(3), pages 160-174.
    9. Sophie-Charlotte Meyer & Ronald Schettkat, 2013. "Price Convergence in Euroland. Evidence from micro data without noise," Schumpeter Discussion Papers sdp13005, Universitätsbibliothek Wuppertal, University Library.

    More about this item

    Keywords

    price level convergence; euro area; euro.;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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