Separated by a Common Currency? Evidence from the Euro Changeover

56 Pages Posted: 27 Apr 2008

See all articles by Arturo Bris

Arturo Bris

IMD International; European Corporate Governance Institute (ECGI); Yale University - International Center for Finance

Augusto Rupérez Micola

Universitat Pompeu Fabra

Date Written: March 3, 2008

Abstract

We study the price convergence of goods and services in the euro area in 2001-2002. To measure the degree of convergence, we compare the prices of around 220 items in 32 European cities. The width of the border is the price difference attributed to the fact that the two cities are in different countries. We find that the markets were quite integrated before the euro changeover. Moreover, we do not identify an integration effect attributable to the introduction of the euro. We then explore the determinants of the European borders. We find that different languages, wealth and population differences tend to split the markets. Historical inflation, though, tends to lead to price convergence.

JEL Classification: F02

Suggested Citation

Bris, Arturo and Rupérez Micola, Augusto, Separated by a Common Currency? Evidence from the Euro Changeover (March 3, 2008). Available at SSRN: https://ssrn.com/abstract=1125263 or http://dx.doi.org/10.2139/ssrn.1125263

Arturo Bris (Contact Author)

IMD International ( email )

Ch. de Bellerive 23
P.O. Box 915
CH-1001 Lausanne
Switzerland

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Yale University - International Center for Finance ( email )

Box 208200
New Haven, CT 06520
United States

Augusto Rupérez Micola

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

HOME PAGE: http://www.ruperezmicola.net

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