The long-run convergence of exchange rates and prices in the European Union |
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Authors: | John Beirne |
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Institution: | 1. European Central Bank, Kaiserstrasse 29, Frankfurt am Main, Germany;2. Centre for Empirical Finance, Brunel University, London , UK |
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Abstract: | This paper provides tests of Purchasing Power Parity (PPP) for members of the EU-27 not in the euro area, using multivariate and panel cointegration techniques, for the period since the introduction of the euro currency in 1999 until the end of 2009. The results indicate that long-run PPP holds in ten cases and that domestic prices or the nominal exchange rate is the main driver of the short-run adjustment to stationarity. These results are discussed in terms of monetary convergence in the long-run. |
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Keywords: | F30 F31 F37 F42 C32 |
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