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Convergence-driven inflation and the channels of its absorption

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  • Konopczak, Karolina
  • Welfe, Aleksander

Abstract

Convergence-driven inflation is an important issue from the perspective of catching-up economies, especially those within a heterogeneous monetary union. This study contributes to the existing literature by analysing the role of the labour and product markets in mitigating inflationary pressure stemming from the catching-up process. It is demonstrated that disregarding the developments of sectoral wages and mark-ups severely distorts the estimates of the convergence-driven inflation. The empirical results obtained for the Czech Republic, Hungary, Poland and Slovakia provide a basis for assessing the risk of common monetary policy in the euro area being inadequate for their economies.

Suggested Citation

  • Konopczak, Karolina & Welfe, Aleksander, 2017. "Convergence-driven inflation and the channels of its absorption," Journal of Policy Modeling, Elsevier, vol. 39(6), pages 1019-1034.
    • Handle: RePEc:eee:jpolmo:v:39:y:2017:i:6:p:1019-1034
    DOI: 10.1016/j.jpolmod.2017.02.001
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    Cited by:

    1. Alexandre Ripamonti, 2019. "Capital Structure Adjustments and Asymmetric Information," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(12), pages 1-1, December.
    2. Ripamonti, Alexandre & Silva, Diego & Moreira Neto, Eurico, 2018. "Asset Pricing and Asymmetric Information," MPRA Paper 87403, University Library of Munich, Germany.
    3. Liu, Tie-Ying & Lee, Chien-Chiang, 2021. "Global convergence of inflation rates," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    4. Ripamonti, Alexandre, 2019. "Capital Structure Adjustments and Asymmetric Information," MPRA Paper 96936, University Library of Munich, Germany.
    5. Grabowski, Wojciech & Welfe, Aleksander, 2020. "The Tobit cointegrated vector autoregressive model: An application to the currency market," Economic Modelling, Elsevier, vol. 89(C), pages 88-100.

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    More about this item

    Keywords

    Real convergence; Inflationary processes; Monetary integration; Panel cointegration; Balassa–Samuelson effect;
    All these keywords.

    JEL classification:

    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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