Wages and prices in Europe: A test of the German leadership thesis

Artis, Michael J.; Nachane, Dilip M.

doi:10.1007/bf02706312

Cited by 47 publications

(14 citation statements)

References 10 publications

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“…Weber (1992) argued that inflation rates should be stationary only where policy‐makers have credibility, and on this basis concluded that only the smaller EMS countries have credibility, and France and Italy do not. This contrasts with the findings of Artis and Nachane (1992), who concluded that the EMS was credible in France, Italy and the Netherlands, but not Belgium. Kremers (1990) showed that for Ireland, whose currency was pegged to sterling before 1979, inflationary expectations were strongly influenced by expectations of inflation in a basket of ERM countries after 1979, whereas previously they had been largely determined by expected UK inflation.…”

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confidence: 98%

Credibility and Disinflation in the European Monetary System

Bleaney

Mizen

1997

The Economic Journal

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Analysis of interest differentials in the European Monetary System has suggested a widespread lack of credibility of the Exchange Rate Mechanism in the sense that in most countries the implicit expected rate of devaluation was significant and not far short of inflation differentials is-aZis the deutschmark. We present and test a model in which prices reflect expectations of exchange rate behaviour. The results provide mixed evidence that price-setting in countries which participated in the ERM was influenced by the exchange rate discipline.* The authors wish to thank the participants of the European Economic Association conference, Prague, September , and two anonymous referees and an associate editor, for comments and suggestions, although responsibility for errors and omissions remains our own.[  ]  Kingdom, which functions as a ' control ' since it did not participate in the ERM in this period.Previous work on EMS credibility using inflation data encompasses a variety of approaches to the question (see Blackburn et al.,  ; Giavazzi and Giovaninni, ). Barrell () looked for structural breaks in wage and price equations in France, Germany, Italy and the United Kingdom, but his results did not yield clear evidence of a regime change at the inception of the ERM. Bleaney () examined the relationship between inflation and central bank independence across OECD countries, and tested whether pegging to the DM by EMS and EFTA countries was equivalent to an increase in central bank independence. He assumed that countries acquired the independence of the Bundesbank in proportion to their refusal to accommodate excess inflation ( is-aZis Germany) through devaluation. His results supported the GP hypothesis. Bini-Smaghi () estimated an inflation regression across  OECD countries and found significant negative coefficients for dummies capturing EMS effects. Weber () argued that inflation rates should be stationary only where policy-makers have credibility, and on this basis concluded that only the smaller EMS countries have credibility, and France and Italy do not. This contrasts with the findings of Artis and Nachane (), who concluded that the EMS was credible in France, Italy and the Netherlands, but not Belgium. Kremers () showed that for Ireland, whose currency was pegged to sterling before , inflationary expectations were strongly influenced by expectations of inflation in a basket of ERM countries after , whereas previously they had been largely determined by expected UK inflation. Gressani et al. () also found significant EMS effects for Italy, using the Banca d'Italia model. Artis and Ormerod () tested whether the influence of past German inflation on current domestic inflation rates had increased relative to the pre-ERM period (characterised as -) for France, Belgium and the Netherlands. Unlike most of the other papers their results were negative.Of all the different approaches discussed above, that of Artis and Nachane is closest in spirit to ours....

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confidence: 98%

Credibility and Disinflation in the European Monetary System

Bleaney

Mizen

1997

The Economic Journal

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“…The present research is related to a growing amount of empirical literature on the role of the EMS in achieving convergence in Europe (MacDonald and Taylor, 1991;Artis and Nachane, 1991;Hall, Robertson and Wickens, 1992;Ardeni, 1992;Caporale and Pittis, 1993;Lou®r and Reichlin, 1993;Berk and Winder, 1994;and Camarero and Tamarit, 1996).…”

Section: Introductionmentioning

confidence: 99%

Price convergence of peripheral European countries on the way to the EMU: A time series approach

Camarero

Esteve

Tamarit

2000

Empirical Economics

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Abstract. This paper examines price and in¯ation convergence between three European countries (Italy, Spain and the U.K.) and a European average and, alternatively, between them and Germany from the beginning of the 80's.For this purpose the long-run stochastic relationships on prices derived from the convergence criteria agreed in the Maastricht Treaty are analyzed. In order to do this, some recent unit root tests have been applied as well as timevarying parameters models.The results reject the long-run convergence hypothesis in all the cases but allow us to accept the existence of catching-up with the European average and Germany in some cases depending on the nature of the prices and on the countries considered.

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“…Australia, Norway, the United States, Germany and Switzerland, their unit root test results match those of Rose (1988) in that the inflation rate is I(0). For the other eleven countries, the Ng and Perron (2001) unit root test results indicate that the inflation rates are I (1).…”

Section: Introductionmentioning

confidence: 98%

“…Hence, the Fisher effect tests can be conducted if inflation and interest rate series are integrated of order one. 1 Fourth, if inflation rates are non-stationary, an inflation convergence within the European Monetary System (EMS) might be identified with cointegration between inflation rates in Germany and each of the other EMS countries. 2 There is no consensus in terms of the empirical evidence in the related literature regarding the stationarity of inflation.…”

Section: Introductionmentioning

confidence: 99%

Are Shocks to Inflation Rates Permanent or Temporary? New Evidence from a Panel SURADF Approach

Hsu¹,

Lee²

2007

2007 International Conference on Convergence Information Technology (ICCIT 2007)

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In this study, we test the property of nonstationary in regard to the inflation rate for 15 OECD countries using the newly-developed Panel SURADF tests of Breuer et al. (2001) for the period 1971-2004. While other Panel-based unit root tests are joint tests of a unit root for all members of the panel and are incapable of determining the mix of the I(0) and I(1) series in the panel setting, the Panel SURADF approach tests a separate unit-root null hypothesis for each individual panel member and, therefore identifies how many and which series in the panel are stationary processes. The property of nonstationary is confirmed for only four of the 15 countries when Breuer et al.'s Panel SURADF tests are conducted. 2007 International Conference on Convergence Information Technology 0-7695-3038-9/07 $25.00

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Wages and prices in Europe: A test of the German leadership thesis

Cited by 47 publications

References 10 publications

Credibility and Disinflation in the European Monetary System

Credibility and Disinflation in the European Monetary System

Price convergence of peripheral European countries on the way to the EMU: A time series approach

Are Shocks to Inflation Rates Permanent or Temporary? New Evidence from a Panel SURADF Approach

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