Measuring macroeconomic convergence and divergence within EMU using long memory

Arbeitspapier

This paper measures the convergence or divergence of EMU inflation rates and industrial production by testing for the existence of fractional cointegration relations. The notion of fractional cointegration allows for long-term equilibria with a higher degree of persistence than allowed for in the standard cointegration framework. We investigate both inflation and industrial production of EMU countries beginning with the introduction of the common currency and including the financial crisis and post-crisis period. Core as well as periphery countries are included in the study. By modelling possible breaks in the persistence structure we find evidence of fractional cointegration as well as a lower persistence before the crisis and a higher persistence by less evidence for fractional cointegration during the crisis. A second break which indicates the end of the crisis can be found as well. In addition, higher inflation persistence can be found for periphery than for core countries.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Hannover Economic Papers (HEP) ; No. 675

Classification and Topics

• Classification: Wirtschaft ; Economic Integration ; Macroeconomic Issues of Monetary Unions ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
• Subject: EMU inflation rates ; industrial production ; fractional cointegration ; persistence breaks

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dräger, Lena ; Kolaiti, Theoplasti ; Sibbertsen, Philipp
• Event: Veröffentlichung
• (who): Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät
• (where): Hannover
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/227558
• Last update: 10.03.2025, 11:41 AM CET