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Monetary Integration, Inflation Convergence and Output Shocks in the European Monetary System

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  • Westbrook, Jilleen R

Abstract

Studies on monetary convergence in Europe have reached mixed conclusions, raising questions about whether the European Monetary System failed to expedite convergence or whether convergence requires redefining. A definition of convergence is explored that conditions monetary policy on factors affecting real exchange rates. Inflation rates have converged, while unconditional monetary policies have not. Once conditioning factors are considered, much of the gap between inflation and monetary convergence is explained. Differences in output trends do not explain the gap, while velocity variability does. Copyright 1998 by Oxford University Press.

Suggested Citation

  • Westbrook, Jilleen R, 1998. "Monetary Integration, Inflation Convergence and Output Shocks in the European Monetary System," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 138-144, January.
    • Handle: RePEc:oup:ecinqu:v:36:y:1998:i:1:p:138-44
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    Cited by:

    1. Giulio Palomba & Emma Sarno & Alberto Zazzaro, 2009. "Testing similarities of short-run inflation dynamics among EU-25 countries after the Euro," Empirical Economics, Springer, vol. 37(2), pages 231-270, October.
    2. Arestis, Philip & Chortareas, Georgios & Magkonis, Georgios & Moschos, Demetrios, 2014. "Inflation targeting and inflation convergence: International evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 31(C), pages 285-295.
    3. Yilmazkuday, Hakan, 2023. "Drivers of inflation convergence across countries: the role of standard gravity variables," Macroeconomic Dynamics, Cambridge University Press, vol. 27(6), pages 1664-1686, September.
    4. Phengpis, Chanwit & Nguyen, Vanthuan, 2009. "Policy coordination and risk premium in foreign exchange markets for major EU currencies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(1), pages 47-62, February.
    5. Mentz, Markus & Sebastian, Steffen P., 2003. "Inflation convergence after the introduction of the Euro," CFS Working Paper Series 2003/30, Center for Financial Studies (CFS).
    6. Su Zhou, 2010. "Nonlinearity and stationarity of inflation rates: Evidence from the euro-zone countries," Working Papers 0006, College of Business, University of Texas at San Antonio.
    7. Su Zhou, 2010. "Nonlinearity and stationarity of inflation rates: Evidence from the euro-zone countries," Working Papers 0006, College of Business, University of Texas at San Antonio.
    8. Bley, Jorg, 2009. "European stock market integration: Fact or fiction?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(5), pages 759-776, December.
    9. Crowder, William J. & Phengpis, Chanwit, 2007. "A re-examination of international inflation convergence over the modern float," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(2), pages 125-139, April.
    10. Murphy, Austin & Zhu, Yun (Ellen), 2008. "Unraveling the complex interrelationships between exchange rates and fundamentals," Journal of Banking & Finance, Elsevier, vol. 32(6), pages 1150-1160, June.
    11. Mark Holmes, 2000. "The Velocity of Circulation: Some new evidence on international integration," International Review of Applied Economics, Taylor & Francis Journals, vol. 14(4), pages 449-459.

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