nr 012 - Price Convergence in Europe from a Macro Perspective: Trends and Determinants (1960-2003)
- DNB Working Papers
-
Publicatiedatum 28 oktober 2004
This paper studies the effects of more than 40 years of European
integration on prices. Up to now, most empirical research in this
area has been micro-based. We follow a macro approach. On the basis
of scaled HICP strong evidence is found for price convergence in
Europe, especially in the 1960s and 1990s. For the DM zone
convergence is found in all decades until the German
re-unification. Next to cost convergence, trade and tax
harmonization, we demonstrate that exchange rate stability has been
an important factor behind this process. Key words: Economic
integration, International price dispersions, Price convergence,
Law of One Price, EMU, DM zone JEL Classifications: E31, E50, F15,
F40