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On price convergence in Eurozone

David Guerreiro () and Valérie Mignon ()

No 2011-34, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: We investigate price level convergence with Germany in eleven countries belonging to the Eurozone between January 1970 and July 2011. Relying on smooth transition regression models, we show that the price convergence process is nonlinear, depending on the size of the price differential: for most countries, price convergence occurs only when price differentials with Germany exceed a certain threshold. Moreover, our findings put forward some heterogeneity across the Eurozone members in terms of price convergence speed, that can be explained by the evolution of price-competitiveness, rigidities in labor markets, but also by specialization patterns.

Keywords: price convergence; Eurozone; smooth transition regression models; half-life (search for similar items in EconPapers)
JEL-codes: C22 E31 F15 F41 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2011
New Economics Papers: this item is included in nep-eec
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Journal Article: On price convergence in Eurozone (2013) Downloads
Working Paper: On price convergence in Eurozone (2013)
Working Paper: On price convergence in Eurozone (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2011-34

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