Inflation and Euro Membership

Johannes K. Dreyer () and Peter A. Schmid
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Johannes K. Dreyer: Roskilde University, Denmark, Postal: Associate Professor of Financial Economics, Roskilde University, Universitetsvej 1, building 25.1, 4000, Roskilde,, Denmark.
Peter A. Schmid: FOM University of Applied Sciences, Germany, Postal: Professor of Finance and Entrepreneurship, FOM University of Applied Sciences, Arnulfstr. 30, 80335, Munich, Germany

Journal of Economic Integration, 2020, vol. 35, issue 2, 264-281

Abstract: This article aims to investigate the relation between Euro membership and inflation. We construct two models that explain inflation using nonmonetary variables. To estimate these models, we collect yearly panel data for the 28 members of the European Union from 1998 to 2016. Due to the problem of endogeneity associated with some variables, we use the panel GMM following Arellano and Bond (1991) to perform all estimations. Results for the estimations of coefficients do not indicate a relation between membership in the Eurozone and inflation rates, neither for the short nor long term. Thus, the results can be considered contra-evidence for statements that the Euro increases short term inflation of its new members or that it reduces long term inflation rates permanently.

Keywords: Inflation Change; Economic integration; EU (search for similar items in EconPapers)
JEL-codes: F15 F33 F43 O52 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0799

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