Price convergence in the EMU? Evidence from micro data Fischer, Christoph

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Fischer, Christoph
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European Economic Review
Economics; Business, international; Business
Academic; Trade
To link to full-text access for this article, visit this link: Byline: Christoph Fischer Keywords: Price convergence; Law of One Price; Euro introduction; Log t test; Hedonic price regression; Scanner data Abstract: The establishment of the European Monetary Union (EMU) was widely expected to cause price convergence among member states. In an investigation of this claim, the present study avoids problems of comparability and representativeness by using an extremely detailed and comprehensive scanner database on washing machine prices and sales volumes for 17 European countries. A hedonic regression yields country-specific time series for quality-adjusted price differentials. Statistically and economically significant deviations from the Law of One Price emerge. Log t tests firmly reject price convergence among EMU countries. Small convergence clusters can be identified but they are unrelated to EMU membership. Author Affiliation: Deutsche Bundesbank, Wilhelm-Epstein-Str. 14, 60431 Frankfurt am Main, Germany Article History: Received 20 July 2010; Accepted 30 January 2012 Article Note: (footnote) [star] The paper represents the author's personal opinions and does not necessarily reflect the views of the Deutsche Bundesbank.
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