Price Convergence in the Emu? Evidence from Micro Data

55 Pages Posted: 8 Jun 2016

Multiple version iconThere are 2 versions of this paper

Date Written: 2009

Abstract

The establishment of European monetary union (EMU) was widely expected to cause price convergence among member states. In an investigation of this claim, the present study avoids problems of comparability and representativeness by using an extremely detailed and comprehensive scanner database on washing machine prices and sales volumes for 17 European countries. A hedonic regression yields country-specific time series for quality-adjusted price differentials. Statistically and economically significant deviations from the LOP emerge. Log t tests firmly reject price convergence among EMU countries. Small convergence clusters can be identified but they are unrelated to EMU membership.

Keywords: price convergence, LOP, euro introduction, log t test, hedonic price regression, scanner data

JEL Classification: E31, F31, F36, C23, L68

Suggested Citation

Fischer, Christoph A., Price Convergence in the Emu? Evidence from Micro Data (2009). Available at SSRN: https://ssrn.com/abstract=2785335 or http://dx.doi.org/10.2139/ssrn.2785335

Christoph A. Fischer (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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