Relative Prices and Economic Adjustment in the U.S. and the EU: A Real Story About European Monetary Union

Alun Thomas and Tamim Bayoumi

No 1994/065, IMF Working Papers from International Monetary Fund

Abstract: Structural vector autoregressions are used to analyze the relationship between real output and relative prices within the EU and the United States, Relative price variability appears to be more important for adjustment within the EU than the United States, reflecting the lower integration of goods and factor markets. In the absence of higher market integration, the lower relative price variability implied by the introduction of a single currency in the EU could well cause significant economic disruption.

Keywords: WP; nominal exchange rate; EU country; EU entrant; EU sample period; relative price; Relative prices; common currency; EMU; price response; EU result; EU goods; price movement; supply curve; EU country estimate; Exchange rates; Currencies; Monetary unions; Personal income; Structural vector autoregression; Europe (search for similar items in EconPapers)
Pages: 36
Date: 1994-06-01
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Working Paper: Relative Prices and Economic Adjustment in the US and EU: A Real Story About European Monetary Union (1994)
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