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Inflation and Euro Membership

Author

Listed:
  • Dreyer, Johannes K.

    (Roskilde University, Denmark)

  • Schmid, Peter A.

    (FOM University of Applied Sciences, Germany)

Abstract

This article aims to investigate the relation between Euro membership and inflation. We construct two models that explain inflation using nonmonetary variables. To estimate these models, we collect yearly panel data for the 28 members of the European Union from 1998 to 2016. Due to the problem of endogeneity associated with some variables, we use the panel GMM following Arellano and Bond (1991) to perform all estimations. Results for the estimations of coefficients do not indicate a relation between membership in the Eurozone and inflation rates, neither for the short nor long term. Thus, the results can be considered contra-evidence for statements that the Euro increases short term inflation of its new members or that it reduces long term inflation rates permanently.

Suggested Citation

  • Dreyer, Johannes K. & Schmid, Peter A., 2020. "Inflation and Euro Membership," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 35(2), pages 264-281.
    • Handle: RePEc:ris:integr:0799
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    More about this item

    Keywords

    Inflation Change; Economic integration; EU;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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