Price level convergence and regional Phillips curves in the US and EMU

We use panel estimates of regional Phillips curves of the hybrid New Keynesian type to study price level convergence within the US and EMU. Regional inflation rates tend to eliminate PPP deviations in both monetary unions, with average half-lives around 3½ years. The start of EMU did not greatly aff...

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Bibliographic Details
Published inJournal of international money and finance Vol. 30; no. 5; pp. 749 - 763
Main Authors Berk, Jan Marc, Swank, Job
Format Journal Article
LanguageEnglish
Published Kidlington Elsevier Ltd 01.09.2011
Elsevier
Elsevier Science Ltd
SeriesJournal of International Money and Finance
Subjects
Economic theory
European Monetary Union
Inflation
Inflation Purchasing power parity Monetary union
Keynesian theory
Monetary economics
Monetary theory
Monetary union
Monetary unions
Phillips curve
Price level
Price levels
Purchasing power parity
Studies
U.S.A
Western Europe
United States > US
Europe
E31
F41
E52
Inflation
Monetary union
Purchasing power parity
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Summary:We use panel estimates of regional Phillips curves of the hybrid New Keynesian type to study price level convergence within the US and EMU. Regional inflation rates tend to eliminate PPP deviations in both monetary unions, with average half-lives around 3½ years. The start of EMU did not greatly affect PPP reversion in the euro area. Where changes in nominal exchange rates accounted for the bulk of the adjustment process before 1999, this role was largely taken over by regional inflation differences since. Notwithstanding clear evidence of forward-lookingness in the US, inflation persistence is substantial in both monetary unions.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0261-5606
1873-0639
DOI:10.1016/j.jimonfin.2011.05.002