How Far From the Euro Area? Measuring Convergence of Inflation Rates in Eastern Europe

Bettina Becker (bettina.becker@durham.ac.uk) and Stephen Hall

No 09/1, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

Abstract: We present a common factor framework of convergence which we implement using principal components analysis. We apply this technique to a dataset of monthly inflation rates of EMU and the Eastern European New Member Countries (NMC) over 1996-2007. In the earlier years, the NMC rates moved independently from an average of the three best performing countries over the past twelve months, while they moved somewhat closer in line with them in the later years. Looking at the sample of the EMU and NMC countries as a whole, there is evidence of a formation of convergence clubs across the two groups.

Keywords: Convergence; inflation rates; European Monetary Union; principal components analysis (search for similar items in EconPapers)
JEL-codes: C22 F31 (search for similar items in EconPapers)
Date: 2009-01
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Journal Article: How far from the Euro Area? Measuring convergence of inflation rates in Eastern Europe (2009)
Working Paper: How Far From the Euro Area? Measuring Convergence of Inflation Rates in Eastern Europe (2009)
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