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The impact of the European Monetary Union on inflation persistence in the Euro area

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  • Meller, Barbara
  • Nautz, Dieter

Abstract

This paper uses the European Monetary Union (EMU) as a natural experiment to investigate whether more effective monetary policy reduces the persistence of inflation. Taking into account the fractional integration of inflation, we confirm that inflation dynamics differed considerably across Euro area countries before the start of EMU. Since 1999, however, results obtained from panel estimation indicate that the degree of long run inflation persistence has converged. In line with theoretical predictions, we find that the persistence of inflation has significantly decreased in the Euro area probably as a result of the more effective monetary policy of the ECB.

Suggested Citation

  • Meller, Barbara & Nautz, Dieter, 2009. "The impact of the European Monetary Union on inflation persistence in the Euro area," SFB 649 Discussion Papers 2009-037, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    • Handle: RePEc:zbw:sfb649:sfb649dp2009-037
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Strausz, Roland, 2009. "The political economy of regulatory risk," SFB 649 Discussion Papers 2009-040, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
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    3. Baillie, Richard T. & Morana, Claudio, 2012. "Adaptive ARFIMA models with applications to inflation," Economic Modelling, Elsevier, vol. 29(6), pages 2451-2459.
    4. Choroś, Barbara & Härdle, Wolfgang Karl & Okhrin, Ostap, 2009. "CDO and HAC," SFB 649 Discussion Papers 2009-038, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    5. Agnieszka Leszczynska & Katarzyna Hertel, 2013. "Inflation persistence – a disaggregated approach," EcoMod2013 5692, EcoMod.
    6. repec:hum:wpaper:sfb649dp2009-040 is not listed on IDEAS
    7. Michał Grajek & Lars-Hendrik Röller, 2012. "Regulation and Investment in Network Industries: Evidence from European Telecoms," Journal of Law and Economics, University of Chicago Press, vol. 55(1), pages 189-216.
    8. Godday Uwawunkonye Ebuh & Afees Salisu & Victor Oboh & Nuruddeen Usman, 2023. "A test for the contributions of urban and rural inflation to inflation persistence in Nigeria," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 16(2), pages 222-246, May.
    9. Chi-Young Choi & Joo Yong Lee & Róisín O'Sullivan, 2015. "Monetary Policy Regime Change and Regional Inflation Dynamics: Looking through the Lens of Sector-Level Data for Korea," Working Papers 2015-20, Economic Research Institute, Bank of Korea.
    10. repec:hum:wpaper:sfb649dp2009-041 is not listed on IDEAS
    11. Strausz, Roland, 2009. "The political economy of regulatory risk," SFB 649 Discussion Papers 2009-040, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    12. Grith, Maria & Härdle, Wolfgang Karl & Park, Juhyun, 2009. "Shape invariant modelling pricing kernels and risk aversion," SFB 649 Discussion Papers 2009-041, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
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    More about this item

    Keywords

    Monetary policy effectiveness and inflation persistence; panel test for fractional integration; change in inflation persistence;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • 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

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