Testing for Inflation Convergence Among European Union Countries: A Panel Approach

Abstract This paper attempts to test for inflation convergence in a sample of 24 European Union countries. To tackle this issue, first- and second-generation panel unit root and stationarity tests are employed so as to provide evidence of inflation convergence before and after the launch of the sing...

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Bibliographic Details
Published in:	Applied economics quarterly 2018-01, Vol.64 (1), p.17-37
Main Authors:	Tsafa-Karakatsanidou, Maria, Fountas, Stilianos
Format:	Article
Language:	eng ; ger
Subjects:	Classification Convergence Economic models Euro Inflation Money Purchasing power parity Second generation
Online Access:	Get full text
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Summary:	Abstract This paper attempts to test for inflation convergence in a sample of 24 European Union countries. To tackle this issue, first- and second-generation panel unit root and stationarity tests are employed so as to provide evidence of inflation convergence before and after the launch of the single currency, the euro. We also test for and then allow for cross-sectional dependence. In general, the findings reveal that conditional inflation convergence exists for all panels under study. The estimation of half lives shows that the evidence for faster speed of convergence applies for the new member states followed by the core countries and the old member states. JEL classifications: C33, E3, F33 Keywords: Inflation Convergence, EU, Maastricht Criteria, Panel data
ISSN:	1611-6607 1865-5122