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Structural changes and deviations from the Purchasing Power Parity within the euro area

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  • Daniele Antonucci
  • Alessandro Girardi

Abstract

This study focuses on macroeconomic convergence within the euro area over the period 1984-2002. The theoretical framework builds on the generalized purchasing power parity hypothesis, which is empirically tested using vector error correction models with broken deterministic components. The euro area turns out to be an integrated entity, even if national economies still exhibit a certain degree of heterogeneity. The results also suggest that up to now the 'euro-effect' in fostering integration within the euro area has been quite weak.

Suggested Citation

  • Daniele Antonucci & Alessandro Girardi, 2006. "Structural changes and deviations from the Purchasing Power Parity within the euro area," Applied Financial Economics, Taylor & Francis Journals, vol. 16(1-2), pages 185-198.
    • Handle: RePEc:taf:apfiec:v:16:y:2006:i:1-2:p:185-198
    DOI: 10.1080/09603100500389432
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    References listed on IDEAS

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    1. Barry Eichengreen, 1992. "Is Europe an Optimum Currency Area?," Palgrave Macmillan Books, in: Silvio Borner & Herbert Grubel (ed.), The European Community after 1992, chapter 8, pages 138-161, Palgrave Macmillan.
    2. Buiter, Willem, 2000. "Optimal Currency Areas: Why Does The Exchange Rate Regime Matter?," CEPR Discussion Papers 2366, C.E.P.R. Discussion Papers.
    3. Peter van Els & Alberto Locarno & Benoît Mojon & Julian Morgan, 2003. "New Macroeconomic Evidence on Monetary Policy Transmission in the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 720-730, 04/05.
    4. Bayoumi, Tamim & Eichengreen, Barry, 1996. "Operationalizing the Theory of Optimum Currency Areas," CEPR Discussion Papers 1484, C.E.P.R. Discussion Papers.
    5. Angeloni,Ignazio & Kashyap,Anil K. & Mojon,Benoît (ed.), 2003. "Monetary Policy Transmission in the Euro Area," Cambridge Books, Cambridge University Press, number 9780521828642, September.
    6. Mongelli, Francesco Paolo, 2002. ""New" views on the optimum currency area theory: what is EMU telling us?," Working Paper Series 138, European Central Bank.
    7. Michael P. Clements & David F. Hendry, 2001. "Forecasting Non-Stationary Economic Time Series," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262531895, April.
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    Cited by:

    1. Cushman, David O., 2008. "Long-run PPP in a system context: No favorable evidence after all for the U.S., Germany, and Japan," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(5), pages 413-424, December.
    2. Dimitrios Sideris, 2011. "Optimum currency areas, structural changes and the endogeneity of the OCA criteria: evidence from six new EU member states," Applied Financial Economics, Taylor & Francis Journals, vol. 21(4), pages 195-206.
    3. Poomthan Rangkakulnuwat & Sung Ahn & Holly Wang & Susan He, 2010. "Extended generalized purchasing power parity and optimum currency area in East Asian countries," Applied Economics, Taylor & Francis Journals, vol. 42(4), pages 497-513.
    4. Niclas Andrén & Lars Oxelheim, 2011. "Exchange rate regime shift and price patterns," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 7(2), pages 153-178, April.
    5. Andrén, Niclas & Oxelheim, Lars, 2006. "Producer Prices in the Transition to a Common Currency," Working Paper Series 668, Research Institute of Industrial Economics.

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