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Thomai Filippeli
''Inflation differentials in EMU: what can we learn from the time series evidence?''
( 2011, Vol. 31 No.3 )
This note discusses whether the inflation process in Portugal, Ireland, Greece and Spain - countries that after the launch of the euro experienced national inflation rates above the weighted average of the EMU- has different time series properties from the EMU average and explains the possible implications of inflation differentials for the union and the national governments of member-countries. We find that the inflation differentials in Greece, Portugal and Spain are a long-run phenomenon which leads to a continuous real exchange appreciation. We interpret this as evidence for the debt problems that have arisen over the last two years in euro area.
Keywords: currency union, inflation differentials, euro area, bayesian estimation
JEL: C1 - Econometric and Statistical Methods: General
E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General
Manuscript Received : Jul 21 2011 Manuscript Accepted : Sep 07 2011

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