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Product market integration in the Euro area

Author

Listed:
  • Irena Raguž Krištić

    (Faculty of Economics and Business, University of Zagreb)

  • Lucija Rogić Dumančić

    (Faculty of Economics and Business, University of Zagreb)

Abstract

The goal of this paper is to determine if the euro area (EA) accession and membership had a significant impact on the product market integration in the EA countries. The paper employs LM and RALS-LM unit root tests with two breaks on the seasonally adjusted monthly Harmonized Index of Consumer Prices (HICP), from 1996:01 to 2017:05. We find EA-accession related breaks in most of the EA11 countries, but, apart from Malta, no such breaks for the later-EA-joiners. However, EA formation had a significant impact on both EA and non-EA countries at that time. We also find greater product market integration and less adverse effects after negative shocks in the EA member countries. However, based on unit root analysis, we find that EA membership in not a sufficient condition for product market integration and integration is not necessarily related to being an EA member.

Suggested Citation

  • Irena Raguž Krištić & Lucija Rogić Dumančić, 2018. "Product market integration in the Euro area," EFZG Working Papers Series 1804, Faculty of Economics and Business, University of Zagreb.
    • Handle: RePEc:zag:wpaper:1804
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    prices; Euro area; stochastic convergence; unit root; structural breaks;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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