Department of Economics and Business Economics

Has the Euro Shrunk the Band? Relative Purchasing Power Parity Convergence in a Currency Union

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Has the Euro Shrunk the Band? Relative Purchasing Power Parity Convergence in a Currency Union. / Macedoni, Luca.

In: The Scandinavian Journal of Economics, Vol. 123, No. 2, 04.2021, p. 593-620.

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

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Macedoni L. Has the Euro Shrunk the Band? Relative Purchasing Power Parity Convergence in a Currency Union. The Scandinavian Journal of Economics. 2021 Apr;123(2):593-620. Epub 2021 Jan 11. doi: 10.1111/sjoe.12417

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Macedoni, Luca. / Has the Euro Shrunk the Band? Relative Purchasing Power Parity Convergence in a Currency Union. In: The Scandinavian Journal of Economics. 2021 ; Vol. 123, No. 2. pp. 593-620.

Bibtex

@article{7e3b9b03e6234c61a05f765d272f5eab,
title = "Has the Euro Shrunk the Band?: Relative Purchasing Power Parity Convergence in a Currency Union",
abstract = "I study the effects of entry to the European Monetary Union (EMU) on relative purchasing power parity (PPP) convergence using monthly disaggregated price indices from 32 European countries from 1999 to 2016. I examine the entry of Cyprus, Malta, Slovakia, and Slovenia to the EMU, and I estimate the bands of inaction of relative prices before and after entry using a threshold autoregressive model. I find a positive effect of the EMU on relative PPP convergence: after entry, the bands of inaction with EMU members fell by 17 percent. Cross‐sectional evidence supports the theoretical prediction that bands of inaction are related to transaction costs.",
keywords = "ADJUSTMENT, ARBITRAGE, Arbitrage, COUNTRY PRICE DISPERSION, GRAVITY, INCREASES, LAW, LEVEL CONVERGENCE, MARKET INTEGRATION, THRESHOLD AUTOREGRESSION, TRADE, currency union, euro, relative PPP convergence, threshold autoregressive model",
author = "Luca Macedoni",
year = "2021",
month = apr,
doi = "10.1111/sjoe.12417",
language = "English",
volume = "123",
pages = "593--620",
journal = "The Scandinavian Journal of Economics",
issn = "0347-0520",
publisher = "Wiley-Blackwell Publishing Ltd.",
number = "2",

}

RIS

TY - JOUR

T1 - Has the Euro Shrunk the Band?

T2 - Relative Purchasing Power Parity Convergence in a Currency Union

AU - Macedoni, Luca

PY - 2021/4

Y1 - 2021/4

N2 - I study the effects of entry to the European Monetary Union (EMU) on relative purchasing power parity (PPP) convergence using monthly disaggregated price indices from 32 European countries from 1999 to 2016. I examine the entry of Cyprus, Malta, Slovakia, and Slovenia to the EMU, and I estimate the bands of inaction of relative prices before and after entry using a threshold autoregressive model. I find a positive effect of the EMU on relative PPP convergence: after entry, the bands of inaction with EMU members fell by 17 percent. Cross‐sectional evidence supports the theoretical prediction that bands of inaction are related to transaction costs.

AB - I study the effects of entry to the European Monetary Union (EMU) on relative purchasing power parity (PPP) convergence using monthly disaggregated price indices from 32 European countries from 1999 to 2016. I examine the entry of Cyprus, Malta, Slovakia, and Slovenia to the EMU, and I estimate the bands of inaction of relative prices before and after entry using a threshold autoregressive model. I find a positive effect of the EMU on relative PPP convergence: after entry, the bands of inaction with EMU members fell by 17 percent. Cross‐sectional evidence supports the theoretical prediction that bands of inaction are related to transaction costs.

KW - ADJUSTMENT

KW - ARBITRAGE

KW - Arbitrage

KW - COUNTRY PRICE DISPERSION

KW - GRAVITY

KW - INCREASES

KW - LAW

KW - LEVEL CONVERGENCE

KW - MARKET INTEGRATION

KW - THRESHOLD AUTOREGRESSION

KW - TRADE

KW - currency union

KW - euro

KW - relative PPP convergence

KW - threshold autoregressive model

U2 - 10.1111/sjoe.12417

DO - 10.1111/sjoe.12417

M3 - Journal article

VL - 123

SP - 593

EP - 620

JO - The Scandinavian Journal of Economics

JF - The Scandinavian Journal of Economics

SN - 0347-0520

IS - 2

ER -