Relative Inflation in the EU Accession Countries of Central and Eastern Europe

Hiranya Nath and Kiril Tochkov

No 201105, Working Papers from Texas Christian University, Department of Economics

Abstract: Following their EU accession, the new member countries from Central and Eastern Europe (CEE) must achieve sustainable price stability as one of the pre-conditions for joining the Economic and Monetary Union (EMU) and adopting the euro. This paper examines the distribution dynamics of inflation rates in ten EU members from CEE relative to the EMU accession benchmark inflation over the period 1990-2009. In contrast to previous studies, we use nonparametric methods to test for convergence in inflation rates between CEE and the EMU benchmark as well as within the CEE sample. Over the entire sample period, we detect a general shift in the CEE inflation distribution towards the EMU benchmark along with intradistributional convergence. However, this process is not uniform. In the early years, it was equally likely for CEE inflation rates to move towards or away from the benchmark. The resulting multimodal distribution gave way to a unimodal distribution in the years leading up to the EU accession, accompanied by a marked shift towards the EMU benchmark. In more recent years, emergence of a bimodal distribution signaled the stratification of relative inflation in CEE into two convergence clubs, which has intensified since the start of the global economic crisis.

Keywords: Inflation; Convergence; EU Accession Countries; Distribution Dynamics (search for similar items in EconPapers)
JEL-codes: C14 E31 E42 P22 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2011-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.econ.tcu.edu/RePEc/tcu/wpaper/wp11-05.pdf First version, 2011 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tcu:wpaper:201105

Access Statistics for this paper

More papers in Working Papers from Texas Christian University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by John Harvey ().