Euro Area Inflation: Aggregation Bias and Convergence

Joseph Byrne and Norbert Fiess

Working Papers from Business School - Economics, University of Glasgow

Abstract: EMU monetary policy targets aggregate Euro Area inflation. Concerns are growing that a focus on aggregate inflation may cause national inflation rates to diverge. While different explanations for diverging aggregate Euro Area inflation have been brought forward, the very impact of aggregation on divergence has however not been studied. We find a striking difference in convergence depending on the level of aggregation. While aggregate national inflation rates are diverging, disaggregate inflation rates are converging. We find that aggregation appears to bias evidence towards non-convergence. Our results are consistent with prominent theoretical and empirical evidence on aggregation bias

Keywords: Euro Area Inflation; Aggregation Bias; Convergence (search for similar items in EconPapers)
JEL-codes: C12 C22 E31 (search for similar items in EconPapers)
Date: 2007-10
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Journal Article: Euro area inflation: aggregation bias and convergence (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2007_41

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