Euro area inflation differentials: unit roots and non-linear adjustment

Gregoriou, A., Kontonikas, A. and Montagnoli, A. (2011) Euro area inflation differentials: unit roots and non-linear adjustment. Journal of Common Market Studies, 49(3), pp. 525-540. (doi: 10.1111/j.1468-5965.2010.02150.x)

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Abstract

This article examines the time-series properties of inflation differentials in 12 economic and monetary union (EMU) countries. The evidence from standard linear unit root tests indicates that inflation differentials are highly persistent in the majority of countries. However, when one allows for the possibility that inflation differentials can be characterized by a nonlinear mean reverting process, one finds evidence of stationarity in all cases. The empirical results suggest that once nonlinearity is accounted for, inflation differentials do not consistently intensify real divergence in the euro area.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Kontonikas, Professor Alexandros
Authors: Gregoriou, A., Kontonikas, A., and Montagnoli, A.
Subjects:H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of Common Market Studies
Publisher:Wiley-Blackwell Publishing Ltd.
ISSN:0021-9886
ISSN (Online):1468-5965
Published Online:07 January 2011

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