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Instability in Cointegration Regressions: Evidence from Inflation Rate Convergence in EU Countries

Estudios de Economia Espanola No. 53

8 Pages Posted: 23 Jul 2001  

Simon Sosvilla-Rivero

Complutense Institute for International Studies

Irene Olloqui

University of Zaragoza - Faculty of Business and Economics

Date Written: July 1999

Abstract

We use cointegration tests that determine endogenously the regime shift to test for bilateral inflation rate convergence in the European Countries in the 1961-1997 period. When applying cointegration tests that do not allow for structural breaks, only for seven of the fourteen countries examined we find evidence of a long run relationship between their inflation rates and the German inflation rate. In contrast, our innovative approach provides strong evidence in favour of such relationship for all countries, except for Greece and Portugal.

Keywords: Inflation, Cointegration, Structural change

JEL Classification: C22, E31, F15

Suggested Citation

Sosvilla-Rivero, Simon and Olloqui, Irene, Instability in Cointegration Regressions: Evidence from Inflation Rate Convergence in EU Countries (July 1999). Estudios de Economia Espanola No. 53. Available at SSRN: https://ssrn.com/abstract=275249 or http://dx.doi.org/10.2139/ssrn.275249

Simon Sosvilla-Rivero (Contact Author)

Complutense Institute for International Studies ( email )

Carretera de Humera s/n
Madrid, Madrid 28223
Spain
+34913932626 (Phone)

HOME PAGE: http://www.ucm.es/info/ecocuan/ssr/

Luisa Irene Olloqui Cuartero

University of Zaragoza - Faculty of Business and Economics ( email )

Gran Via, 2
50005 Zaragoza, Zaragoza 50005
Spain
+34 976 761000 (Phone)

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