The role of the exchange rate regime in the process of real and nominal convergence

Abstract

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. www.econstor.eu One general result is that B-S can at best explain only part of the excess inflation observed in the European catching-up countries, which suggests that other factors may be at play. In these and related studies, however, the potential role of the exchange rate regime in affecting price convergence in Europe has been overlooked. In this respect, we claim that the choice of the exchange rate regime has decisively affected the path of nominal convergence. To show this, we first model the (endogenous) choice of the exchange rate regime and, in a second stage, estimate a B-S type of regression for each regime. Our results show that, for countries which pegged to or adopted the euro, the effect of the same increase in the dual productivity growth (that is, the difference in productivity growth between the traded and nontraded sectors) on the dual inflation differential is more than twice as large as that in the "flexible" countries. We conclude that, in a catching-up country, premature euro adoption may foster excess inflation, beyond that which is to be expected as a consequence of productivity convergence on the basis of the B-S effect. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SJEL Classification: C34, E52, F31

The role of institutions in explaining wage determination in the Eurozone: A panel cointegration approach

“…Indeed, a more rigid exchange rate regime -such as a strict peg or monetary union -fosters convergence of nominal variables (prices and wages) ahead of real variables due to easier cross-country comparisons (see D'Adamo and Rovelli, 2015). In particular, unions in low-wage countries may be able to extract higher wages, in accordance with the "envy effects" identified by Oswald (1979).…”

Cyclical Macroeconomic Effects of Exchange Rate in Poland

“…Kurs płynny może być korzystny w warunkach konwergencji do poziomu dochodu krajów Unii Europejskiej [Becker i in. 2010;D'Adamo, Rovelli 2013], ale znaczna niestabilność kursu walutowego może temu przeszkadzać. Zbyt duże wahania kursu walutowego mają destabilizujący wpływ przede wszystkim na gospodarki rozwijające się z niskim poziomem dochodu, słabszy efekt obserwowany jest w gospodarkach krajów uprzemysłowionych [Ahmed i in.…”

Institutions et formation des salaires dans la zone euro: une analyse à partir de techniques de coïntégration sur données de panel

“…En effet, un régime de taux de change rigide -systèmes de parité fixe ou union monétaire -favorise la convergence des variables nominales (prix et salaires) plutôt que celle des variables réelles, parce que la comparaison entre pays est facilitée (voir D'Adamo et Rovelli, 2015). En particulier, les syndicats des pays où les niveaux salariaux sont plus faibles peuvent obtenir des augmentations en faisant jouer l'effet «jalousie» mis en lumière par Oswald (1979).…”