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Analysis of the long-term relationships of the underlying rates of inflation in the EMU member states

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  • F. Javier Trivez

Abstract

The aim of this paper is to analyse whether or not there is a long-term stable equilibrium relationship between the underlying rates of inflation of the member states that have adhered to Economic and Monetary Union (EMU). This longterm equilibrium represents an essential requirement for compliance with the convergence criterion of price stability, through which it is possible to guarantee the maintenance of the levels of relative competitiveness of these member states. To that end, the concept of underlying inflation is defined, obtained on the basis of the trend-cycle component of the consumer price series, having first eliminated the calendar and Easter effects, as well as the outliers, from these original series. After applying a bivariate cointegration test to these components, essentially pessimistic conclusions are obtained with respect to compliance with the said stability criterion.

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  • F. Javier Trivez, 2001. "Analysis of the long-term relationships of the underlying rates of inflation in the EMU member states," Applied Economics, Taylor & Francis Journals, vol. 33(15), pages 2001-2007.
    • Handle: RePEc:taf:applec:v:33:y:2001:i:15:p:2001-2007
    DOI: 10.1080/00036840010024291
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    Cited by:

    1. 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.

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