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http://bura.brunel.ac.uk/handle/2438/14836
Title: | Inflation convergence in the EMU |
Authors: | Karanasos, M Koutroumpis, P Karavias, Y Kartsaklas, A Arakelian, V |
Keywords: | Convergence;European Monetary Union;Inflation differentials;Unit root tests;Stationarity tests |
Issue Date: | 2016 |
Citation: | Journal of Empirical Finance, 2016, 39 pp. 241 - 253 |
Abstract: | We study the convergence properties of inflation rates among the countries of the European Monetary Union over the period 1980–2013. Recently developed panel unit root/stationarity tests cannot reject the stationarity hypothesis. This implies that some countries have been in the process of converging absolutely or relatively. By using a clustering algorithm we statistically detect three absolute convergence clubs in the pre-euro period, which comprise early accession countries. In particular, Luxembourg clusters with Austria and Belgium, while a second sub-group includes Germany and France and the third The Netherlands and Finland. We also detect two separate clusters of early accession countries in the post-1997 period: a sub-group with Germany, Austria, Belgium and Luxembourg, and one with France and Finland. For the rest of the countries/cases we find evidence of divergent behavior. Robustness is checked by testing pairwise convergence in a Bayesian framework. The outcome broadly confirms our findings. |
URI: | http://bura.brunel.ac.uk/handle/2438/14836 |
DOI: | http://dx.doi.org/10.1016/j.jempfin.2016.07.004 |
ISSN: | 0927-5398 |
Appears in Collections: | Dept of Economics and Finance Research Papers |
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