Adjustment in EMU: Is Convergence Assured?
Sebastian Dullien (),
Ingrid Groessl () and
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Ingrid Groessl: Department for Socioeconomics, Department for Economics, University of Hamburg
No 200907, Macroeconomics and Finance Series from University of Hamburg, Department of Socioeconomics
Using a modified version of the model presented by Belke and Gros (2007), we analyze the stability of adjustment in a currency union. Using econometric estimates for parameter values we check the stability conditions for the 11 original EMU countries and Greece. We found significant instability in the model for a large number of countries. We then simulate the adjustment process for some empirically observed parameter values and find that even for countries with relatively smooth adjustment, the adjustment to a price shock in EMU might take several decades.
Keywords: EMU; convergence; stability; inflation (search for similar items in EconPapers)
JEL-codes: C32 E32 E61 (search for similar items in EconPapers)
Pages: 36 pages
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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https://www.wiso.uni-hamburg.de/repec/hepdoc/macppr_7_2009.pdf First version, 2009 (application/pdf)
Working Paper: Adjustment in EMU: Is Convergence Assured? (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hep:macppr:200907
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