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Separated by a common currency? Evidence from the Euro changeover

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  • Arturo Bris
  • Augusto Rupérez-Micola

Abstract

We study the price convergence of goods and services in the euro area in 2001-2002. To measure the degree of convergence, we compare the prices of around 220 items in 32 European cities. The width of the border is the price di¤erence attributed to the fact that the two cities are in different countries. We find that the 2001 European borders are negative, which suggests that the markets were very integrated before the euro changeover. Moreover, we do not identify an integration effect attributable to the introduction of the euro. We then explore the determinants of the European borders. We find that different languages, wealth and population differences tend to split the markets. Historical inflation, though, tends to lead to price convergence.

Suggested Citation

  • Arturo Bris & Augusto Rupérez-Micola, 2008. "Separated by a common currency? Evidence from the Euro changeover," Economics Working Papers 1086, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:1086
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    References listed on IDEAS

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    Keywords

    Euro; economic integration;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration

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