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Product market integration in the Euro area

Irena Raguž Krištić () and Lucija Rogić Dumančić ()
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Irena Raguž Krištić: Faculty of Economics and Business, University of Zagreb
Lucija Rogić Dumančić: Faculty of Economics and Business, University of Zagreb

No 1804, EFZG Working Papers Series from Faculty of Economics and Business, University of Zagreb

Abstract: The goal of this paper is to determine if the euro area (EA) accession and membership had a significant impact on the product market integration in the EA countries. The paper employs LM and RALS-LM unit root tests with two breaks on the seasonally adjusted monthly Harmonized Index of Consumer Prices (HICP), from 1996:01 to 2017:05. We find EA-accession related breaks in most of the EA11 countries, but, apart from Malta, no such breaks for the later-EA-joiners. However, EA formation had a significant impact on both EA and non-EA countries at that time. We also find greater product market integration and less adverse effects after negative shocks in the EA member countries. However, based on unit root analysis, we find that EA membership in not a sufficient condition for product market integration and integration is not necessarily related to being an EA member.

Keywords: prices; Euro area; stochastic convergence; unit root; structural breaks (search for similar items in EconPapers)
JEL-codes: E31 F45 O52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-mac
Date: 2018-07-17
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http://web.efzg.hr/repec/pdf/Clanak%2018-04.pdf First version, 2018 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:zag:wpaper:1804

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