Dynamics and Factors of Inflation Convergence in the European Union

Václav Brož and Evžen Kočenda

No 2017/24, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: We provide comprehensive evidence of the widespread occurrence of inflation convergence between all countries of the European Union from 1999 to 2016. We also show that convergence was more inclusive in the years after the global financial crisis—including the European sovereign debt crisis and the period of zero lower bound—and that price-stabilityoriented monetary strategies might have in fact facilitated this convergence. Our results are robust with respect to the use of three inflation benchmarks (the cross-sectional average, the inflation target of the European Central Bank, and the Maastricht criterion), structural breaks, and a core inflation measure. Our main findings imply that further enlargement of the euro area is feasible from the perspective of the convergence of inflation rates between the countries of the European Union.

Keywords: inflation convergence; European Union; global financial crisis; zero lower bound; monetary strategy (search for similar items in EconPapers)
JEL-codes: C32 E31 E58 F45 G01 K33 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2017-11, Revised 2017-11
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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Journal Article: Dynamics and factors of inflation convergence in the European union (2018)
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