Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103170
Authors: 
Fritsche, Ulrich
Kuzin, Vladimir
Year of Publication: 
2007
Series/Report no.: 
DEP (Socioeconomics) Discussion Papers, Macroeconomics and Finance Series 3/2007
Abstract: 
Inflation differentials in the Euro area are mainly due to a sustained divergence of wage developments across the Euro area, and narrower differences in labour productivity growth (Alvarez et al., 2006). We investigate convergence of inflation using unit labour cost (ULC) growth and applying PANIC (Bai and Ng, 2002, 2004) and cluster procedures (Hobijn and Franses, 2000, Busetti et al., 2006) to Euro area countries as well as US States, US Census Regions and German Laender. Euro area differs in that dispersion in general (and its fraction due to idiosyncratic factors in specific) is larger and common factors are much less important in explaining the variance of ULC growth. We report evidence for convergence clusters in all countries.
Subjects: 
Unit labor costs
inflation
European Monetary Union
Germany
United States of America
convergence
convergence clubs
panel unit root tests
PANIC
JEL: 
E31
O47
C32
C33
Document Type: 
Working Paper

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