Testing for price convergence: how close are EU New Member's States to euro zone?

Iuliana Matei

Economics Bulletin, 2009, vol. 29, issue 4, 3083-3094

Abstract: The purpose of my paper is to empirically explore the validity of the relative version of purchasing power parity (PPP) for nine EU New Member States (NMS) using unit root and panel unit root frameworks. Three periods are considered: the period before NMS joined the EU (1995:01-2004:04), the period after NMS joined the EU (2004:05-2008:12), and the sum of the two periods (1995-2008). We find evidence that real exchange rates follow generally unit-root processes implying that PPP doesn't hold even as a long-run relationship. In addition, results show that price co-movements increase strongly after NMS joined the EU.

Keywords: Purchasing power parity; inflation convergence; developing countries; panel unit-root; time series unit roots; EU (search for similar items in EconPapers)
JEL-codes: E0 E3 (search for similar items in EconPapers)
Date: 2009-12-11
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http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I4-P297.pdf (application/pdf)

Related works:
Working Paper: Testing for price convergence: how close are EU New Member's States to euro zone? (2009)
Working Paper: Testing for price convergence: how close are EU New Member's States to euro zone? (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-09-00169

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