Arbeitspapier

Adjustment in EMU: Is Convergence Assured?

Using a modified version of the model presented by Belke and Gros (2007), we analyze the stability of adjustment in a currency union. Using econometric estimates for parameter values we check the stability conditions for the 11 original EMU countries and Greece. We found significant instability in the model for a large number of countries. We then simulate the adjustment process for some empirically observed parameter values and find that even for countries with relatively smooth adjustment, the adjustment to a price shock in EMU might take several decades. Keywords: EMU, convergence, stability.

Language
Englisch

Bibliographic citation
Series: IMK Working Paper ; No. 7/2009

Classification
Wirtschaft
Business Fluctuations; Cycles
Policy Objectives; Policy Designs and Consistency; Policy Coordination
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Subject
EMU
convergence
stability
inflation

Event
Geistige Schöpfung
(who)
Dullien, Sebastian
Fritsche, Ulrich
Größl, Ingrid
Paetz, Michael
Event
Veröffentlichung
(who)
Hans-Böckler-Stiftung, Institut für Makroökonomie und Konjunkturforschung (IMK)
(where)
Düsseldorf
(when)
2009

Handle
URN
urn:nbn:de:101:1-20091104835
Last update
10.03.2025, 11:45 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Dullien, Sebastian
  • Fritsche, Ulrich
  • Größl, Ingrid
  • Paetz, Michael
  • Hans-Böckler-Stiftung, Institut für Makroökonomie und Konjunkturforschung (IMK)

Time of origin

  • 2009

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