Regional price adjustment in a monetary union: the case of EMU

J.m Berk and J. Swank
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J.m Berk: Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics

No 16, Serie Research Memoranda from VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics

Abstract: Using a New-Keynesian framework, we investigate how far the inflationary processes in member states of EMU cause regional price levels to converge. We fail to produce hard evidente of the present existence of such an adjustment mechanism, not-withstanding that inflation in some countries tends to converge towards the euro area level. Overall, inflation persistence has declined significantly over the years, but there are still marked differences between countries on this score. We conclude that the euro area is not an optimal currency area yet, lending support to the quest for further structural reforms in European labour and product markets.

Keywords: Inflation; EMU; monetary policy (search for similar items in EconPapers)
JEL-codes: E31 E58 F02 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (12)

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