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The impact of real convergence on inflation in the new EU Member States 1
| Content Provider | Semantic Scholar |
|---|---|
| Author | León-Ledesma, Miguel A. Nerlich, Carolin Rupprecht, Siegfried |
| Copyright Year | 2006 |
| Abstract | The paper discusses several equilibrium-based channels through which real convergence could affect inflation and how their impact is likely to develop in the coming years. The channels that are examined in more detail are the Balassa-Samuelson effect, changes in the consumption pattern, declining energy intensity, lower macroeconomic volatility, higher credit growth and increased trade openness. In the empirical part of the paper we aim to evaluate the relevance of these channels in each of the new EU Member States (EU-10). Given the limited data availability, we used the General-to-Specific (GETS) modelling strategy starting from an unrestricted VAR model to select for each country those convergence-related variables that are associated with the above mentioned channels and that have had an impact on inflation. Productivity growth and macroeconomic volatility appear to be the most important explanatory variables followed by credit growth, openness and wage convergence. We then test the robustness of the results by using two different catching-up scenarios to see how the convergence-related variables are likely to affect inflation developments in the EU-10 in the future. 1 We would like to thank H.-J. Klöckers, K. Masuch, R. Martin, P. Hiebert and seminar participants at the ECB for helpful comments. The views expressed herein are those of the authors and may not reflect the view of the European Central Bank. 2 University of Kent 3 European Central Bank 4 ETH Zürich |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://macro.soc.uoc.gr/11conf/docs/Leon-Ledesma_Paper%20real%20convergence%20-%20Crete%20-%20Dec%202006.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
