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Price convergence in the EMU? Evidence from micro data

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  • Fischer, Christoph

Abstract

The establishment of European monetary union (EMU) was widely expected to cause price convergence among member states. In an investigation of this claim, the present study avoids problems of comparability and representativeness by using an extremely detailed and comprehensive scanner database on washing machine prices and sales volumes for 17 European countries. A hedonic regression yields country-specific time series for quality-adjusted price differentials. Statistically and economically significant deviations from the LOP emerge. Log t tests firmly reject price convergence among EMU countries. Small convergence clusters can be identified but they are unrelated to EMU membership.

Suggested Citation

  • Fischer, Christoph, 2009. "Price convergence in the EMU? Evidence from micro data," Discussion Paper Series 1: Economic Studies 2009,06, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdp1:7575
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    More about this item

    Keywords

    price convergence; LOP; euro introduction; log t test; hedonic price regression; scanner data;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables

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