TY - JOUR
T1 - Inflation and Euro Membership
AU - Dreyer, Johannes Kabderian
AU - Schmid, Peter Alfons
PY - 2020
Y1 - 2020
N2 - This article aims to investigate the relation between Euro membership and inflation. We construct two models that explain inflation using nonmonetary variables. To estimate these models, we collect yearly panel data for the 28 members of the European Union from 1998 to 2016. Due to the problem of endogeneity associated with some variables, we use the panel GMM following Arellano and Bond (1991) to perform all estimations. Results for the estimations of coefficients do not indicate a relation between membership in the Eurozone and inflation rates, neither for the short nor long term. Thus, the results can be considered contra-evidence for statements that the Euro increases short term inflation of its new members or that it reduces long term inflation rates permanently.
AB - This article aims to investigate the relation between Euro membership and inflation. We construct two models that explain inflation using nonmonetary variables. To estimate these models, we collect yearly panel data for the 28 members of the European Union from 1998 to 2016. Due to the problem of endogeneity associated with some variables, we use the panel GMM following Arellano and Bond (1991) to perform all estimations. Results for the estimations of coefficients do not indicate a relation between membership in the Eurozone and inflation rates, neither for the short nor long term. Thus, the results can be considered contra-evidence for statements that the Euro increases short term inflation of its new members or that it reduces long term inflation rates permanently.
KW - EU membership
KW - EZ membership
KW - Economic integration
KW - Euro effects
KW - Inflation Change
U2 - 10.11130/jei.2020.35.2.264
DO - 10.11130/jei.2020.35.2.264
M3 - Journal article
SN - 1225-651X
VL - 35
SP - 264
EP - 281
JO - Journal of Economic Integration
JF - Journal of Economic Integration
IS - 2
ER -