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Inflation differentials in EMU: what can we learn from the time series evidence?

Author

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  • Thomai Filippeli

    (University of Buckingham)

Abstract

This note discusses whether the inflation process in Portugal, Ireland, Greece and Spain - countries that after the launch of the euro experienced national inflation rates above the weighted average of the EMU- has different time series properties from the EMU average and explains the possible implications of inflation differentials for the union and the national governments of member-countries. We find that the inflation differentials in Greece, Portugal and Spain are a long-run phenomenon which leads to a continuous real exchange appreciation. We interpret this as evidence for the debt problems that have arisen over the last two years in euro area.

Suggested Citation

  • Thomai Filippeli, 2011. "Inflation differentials in EMU: what can we learn from the time series evidence?," Economics Bulletin, AccessEcon, vol. 31(3), pages 2541-2548.
    • Handle: RePEc:ebl:ecbull:eb-11-00512
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    File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I3-P228.pdf
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    References listed on IDEAS

    as
    1. Frank Smets & Rafael Wouters, 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," American Economic Review, American Economic Association, vol. 97(3), pages 586-606, June.
    2. Uhlig, H.F.H.V.S., 2002. "One Money, But Many Fiscal Policies in Europe : What are the Consequences?," Other publications TiSEM f2cdcc6c-329f-4ae6-915b-2, Tilburg University, School of Economics and Management.
    3. Christophe Schalck, 2011. "The European fiscal framework: What lessons can we learn from the crisis?," Economics Bulletin, AccessEcon, vol. 31(1), pages 358-366.
    4. Angeloni Ignazio & Ehrmann Michael, 2007. "Euro Area Inflation Differentials," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-36, August.
    5. repec:ebl:ecbull:v:5:y:2006:i:9:p:1-11 is not listed on IDEAS
    6. Uhlig, H.F.H.V.S., 2002. "One Money, But Many Fiscal Policies in Europe : What are the Consequences?," Discussion Paper 2002-32, Tilburg University, Center for Economic Research.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Knobel, A. & Mironov, A., 2015. "Assessment of CIS Countries Readiness for Creation of Currency Union," Journal of the New Economic Association, New Economic Association, vol. 25(1), pages 76-101.

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    More about this item

    Keywords

    currency union; inflation differentials; euro area; bayesian estimation;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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