Assessing Inflation Convergence in the European Union: Does Euro Membership Make a Difference?
Assessing Inflation Convergence in the European Union: Does Euro Membership Make a Difference?

Summary/Abstract: This study offers a new perspective on the debate concerning inflation convergence in the Euro Area. A new pair-wise unit root testing procedure advocated by Pesaran (2007) is employed on all possible bivariate consumer price index differentials. Evidence in favour of long-run convergence is confirmed where the fraction of rejections in favour of stationarity exceeds the size of the individual tests. We find evidence of long-run inflation convergence across the EU though the speed of convergence is lower for current non-Euro Area countries.

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