Euro area inflation: aggregation bias and convergence

Byrne, Joseph P.; Fiess, Norbert

doi:10.1007/s10290-010-0053-y

Cited by 5 publications

(8 citation statements)

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“…It was the most remarkable in Germany, which should be linked to the nation's expansive fiscal policy that was a consequence of its reunification. In the remaining member states of the then EU prices remained similar or fell (Byrne et al, 2010;Gros et al, 201;Lopez et al, 2012;Meller et al, 2012;Castañeda et al, 2017).…”

Section: The Inflationary Processes In the Euro Areamentioning

confidence: 99%

“…The growing price divergence in the euro area member states caused the lower and lower adequacy of the interest rate set by the ECB (Byrne et al, 2010). For the countries with an above-average increase in prices, the interest rate was too low, which was an additional factor stimulating inflationary processes.…”

Section: The Inflationary Processes In the Euro Areamentioning

confidence: 99%

“…Therefore, favorable conditions for ensuring an increase in consumer demand and, consequently, a growth in prices, were created. Spain's accession to the eurozone only deepened the aforementioned phenomena (Byrne et al, 2010;Carballo-Cruz, 2011). During that time, the ECB's nominal interest rate decreased (particularly from 2001 to 2004), while inflation grew.…”

Section: The Monetary Policymentioning

confidence: 99%

“…Reflections on the role of the single European currency in shaping inflationary processes have been the subject-matter of many reports (Byrne et al, 2010;Meller et al, 2012;Gomez-Gonzalez et al, 2018). The Polish-language literature, as well, has discussed the consequences of monetary integration (NBP, 2009;BAS, 2013;Pietrucha, 2015;NIK, 2019).…”

Section: Introductionmentioning

confidence: 99%

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Adopting the Euro will Cause an Increase in Prices: A Study on Inflationary Processes in Euro Area Member States

Nowaczyk¹,

Hernik²

2020

ERSJ

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Purpose: The main purpose of the article is to identify factors that may affect the course of inflation processes in Poland after the adoption of the single European currency. Design/Methodology/Approach: The mechanism triggering an inflationary spiral in the first years after the adoption of the euro was especially visible in Spain, which became the subject of comparative analysis. Based on literature, it was determined that the price increase in Spain resulted from an asymmetric demand shock. Its sources should be sought in Spain's adoption of a lower interest rate and in the structural features of the country's economy. Similarly, Poland's submission to the single monetary policy regime imposed by the European Central Bank may affect the course of inflationary processes. This study made use of the document analysis, comparative analysis, and statistical analysis methods. Findings: Factors that may affect inflation processes in Poland after the adoption of the single currency will be the adoption of a lower interest rate, and expansionary fiscal policy. Lending policy and inflation expectations will be less likely to stimulate price increases. These factors may contribute to the occurrence of asymmetric shock, i.e. surplus of global demand over supply. Reduction of the inflation risk will require a tightening of lending and fiscal policy. Otherwise, the Polish economy will be exposed to the occurrence of crises. Practical Implications: Reflections on the importance of the single European currency in the course of inflation processes can be a valuable source of information for decision makers in preventing crisis phenomena. The more so because six Central and Eastern European countries have committed themselves in the Accession Treaties to the introduction of the euro and will face similar dilemmas.

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Section: The Inflationary Processes In the Euro Areamentioning

confidence: 99%

Section: The Inflationary Processes In the Euro Areamentioning

confidence: 99%

Section: The Monetary Policymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Adopting the Euro will Cause an Increase in Prices: A Study on Inflationary Processes in Euro Area Member States

Nowaczyk¹,

Hernik²

2020

ERSJ

View full text Add to dashboard Cite

show abstract

“…. In terms of methodology applied,Byrne and Fiess (2010) come closest to our analysis. Overall inflation differentials are found to be quite persistent Altissimo et al (2009).…”

mentioning

confidence: 99%

Productivity in the Euro Area: Any Evidence of Convergence?

Sondermann

2012

SSRN Journal

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Productivity in the euro area: any evidence of convergence?

Sondermann

2013

Empir Econ

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractSizable prevailing real economic disparities among countries in a currency union potentially involve costs for those countries for which the aggregate policy stance is not appropriate. This paper contributes to the literature by testing for productivity convergence among euro area countries. While no convergence can be found on the aggregate level, selected service sectors and manufacturing sub-industries indicate evidence of convergence. In a search for factors influencing productivity, investments in research and development as well as a high skill level of employees are shown to be beneficial whereas regulations constitute a burden. Consequently, euro area countries should engage in structural reforms where necessary to provide a more competitive environment, eventually facilitating economic convergence. Non-Technical SummaryAlthough similar levels of output are not imperative for a currency union to function, the costs for the individual member states tend to rise when economic disparities are firmly entrenched.This follows from a common policy stance, which will be too loose for some countries and too tight for others (Hallett and Weymark 2002). In order to shed light on convergence in real economic activity in the euro area, productivity developments among member states are analysed.From a theoretical standpoint we are agnostic about whether or not convergence should be expected. While the neoclassical growth models postulate convergence between higher and lower income countries, the endogenous growth theory allows for scenarios of persistent divergence among countries. Given the European economic and monetary integration since the 1950s, however, capital, labour and knowledge barriers have abated, which might have facilitated convergence. In adition, deregulation of some service sectors and advances in ICT technology could have been supportive.The convergence hypothesis is transformed into an empirically testable form by making use of recent advances in panel unit root tests. The paper contributes to the literature in that it provides empirical evidence on whether productivity convergence among euro area countries has taken place. Besides the look at the total economy, nine main euro area sectors (and eleven manufacturing sub-sectors) are put to test. In addition to the broad dataset used, this study captures the changes in labour market patterns by drawing on hours worked as input measure in contrast to total p...

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Euro area inflation: aggregation bias and convergence

Cited by 5 publications

References 45 publications

Adopting the Euro will Cause an Increase in Prices: A Study on Inflationary Processes in Euro Area Member States

Adopting the Euro will Cause an Increase in Prices: A Study on Inflationary Processes in Euro Area Member States

Productivity in the Euro Area: Any Evidence of Convergence?

Productivity in the euro area: any evidence of convergence?

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