Separated by a common currency? Evidence from the Euro changeover

Arturo Bris and Augusto Rupérez-Micola

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We study the price convergence of goods and services in the euro area in 2001-2002. To measure the degree of convergence, we compare the prices of around 220 items in 32 European cities. The width of the border is the price di¤erence attributed to the fact that the two cities are in different countries. We find that the 2001 European borders are negative, which suggests that the markets were very integrated before the euro changeover. Moreover, we do not identify an integration effect attributable to the introduction of the euro. We then explore the determinants of the European borders. We find that different languages, wealth and population differences tend to split the markets. Historical inflation, though, tends to lead to price convergence.

Keywords: Euro; economic integration (search for similar items in EconPapers)
JEL-codes: F15 (search for similar items in EconPapers)
Date: 2008-03
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1086

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