Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/83351 
Year of Publication: 
2008
Series/Report no.: 
IES Working Paper No. 24/2008
Publisher: 
Charles University in Prague, Institute of Economic Studies (IES), Prague
Abstract: 
In this paper, we examine the determinants of inflation differentials in a panel of the new European Union member states vis-à-vis the euro area in 1997-2007. Our main results are as follows. Exchange rate appreciation and higher price level in the new EU members is associated with narrower inflation differential vis-à-vis the euro area, while fiscal deficit and positive output gap seem to contribute to higher inflation differential. Nevertheless, the effect of price convergence on inflation differentials is found to be dominating in these countries suggesting that a country with price level 20% below the euro area average is likely to exhibit inflation nearly one percentage point above the euro area. Overall, our results indicate that real convergence factors rather than cyclical variation are more important for inflation developments in the new EU members, as compared to the euro area.
Subjects: 
inflation differentials
price convergence
exchange rate
New EU members
panel data
JEL: 
E31
F41
Document Type: 
Working Paper

Files in This Item:
File
Size
448.09 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.