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Is price dynamics homogeneous across Eurozone countries?

Author

Listed:
  • David Guerreiro

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Marc Joëts

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Valérie Mignon

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

The aim of this paper is to investigate whether price dynamics is homogeneous across the Eurozone countries. Relying on monthly data over the January 1970-July 2011 period, we test for the absolute purchasing power parity (PPP) hypothesis through the implementation of second-generation panel unit root and cointegration tests. Our results show that price dynamics are heterogeneous depending on both the time period and the considered group of countries. More specifically, while PPP is validated for the core EMU countries, this hypothesis does not hold for Northern peripheral economies. Turning to the Southern countries, PPP is observed only before the launch of the euro.

Suggested Citation

  • David Guerreiro & Marc Joëts & Valérie Mignon, 2012. "Is price dynamics homogeneous across Eurozone countries?," Working Papers hal-04141137, HAL.
    • Handle: RePEc:hal:wpaper:hal-04141137
    Note: View the original document on HAL open archive server: https://hal.science/hal-04141137
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    References listed on IDEAS

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    1. Ivo Arnold & Bastiaan Verhoef, 2004. "External causes of Euro zone inflation differentials," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 39(5), pages 254-263, September.
    2. Allington, Nigel FB & Kattuman, Paul A & Waldmann, Florian A, 2005. "One Market, One Money, One Price?," MPRA Paper 835, University Library of Munich, Germany.
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    1. repec:wsr:wpaper:y:2013:i:118 is not listed on IDEAS
    2. Guerreiro, David & Mignon, Valérie, 2013. "On price convergence in Eurozone," Economic Modelling, Elsevier, vol. 34(C), pages 42-51.
    3. Guerreiro, David, 2014. "Is the European debt crisis a mere balance of payments crisis?," Economic Modelling, Elsevier, vol. 44(S1), pages 50-56.

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    More about this item

    Keywords

    price convergence; Eurozone; panel unit root tests; half-life;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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