Details
| Original language | English |
|---|---|
| Pages (from-to) | 2333-2356 |
| Number of pages | 24 |
| Journal | Empirical economics |
| Volume | 65 |
| Issue number | 5 |
| Early online date | 28 Apr 2023 |
| Publication status | Published - Nov 2023 |
Abstract
This paper tests for convergence of EMU inflation rates and industrial production by testing for the existence of fractional cointegration relations. The notion of fractional cointegration allows for long-term equilibria with a higher degree of persistence than allowed for in the standard cointegration framework. Over the full sample from 1999:Q1–2021:Q4, we find evidence of fractional cointegration in both inflation and industrial production among many country pairs. Our results suggest some evidence for “convergence clusters” among either core or periphery countries in the case of inflation. Similarly, we find stronger evidence of cointegration pairs among core countries for industrial production compared to periphery or mixed core–periphery groups. Testing for a break in the persistence structure, the results show evidence of a break in the persistence of both inflation and industrial production in a number of countries. Inflation persistence is substantially higher after the break, suggesting a higher potential for diverging processes during economic crises. On the contrary, for the case of industrial production, persistence is lower during the post-crisis period.
Keywords
- EMU inflation rates, Fractional cointegration, Industrial production, Persistence breaks
ASJC Scopus subject areas
- Mathematics(all)
- Statistics and Probability
- Mathematics(all)
- Mathematics (miscellaneous)
- Social Sciences(all)
- Social Sciences (miscellaneous)
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
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In: Empirical economics, Vol. 65, No. 5, 11.2023, p. 2333-2356.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Measuring macroeconomic convergence and divergence within EMU using long memory
AU - Kolaiti, Theoplasti
AU - Sibbertsen, Philipp
AU - Dräger, Lena Charlotte Rosemarie
PY - 2023/11
Y1 - 2023/11
N2 - This paper tests for convergence of EMU inflation rates and industrial production by testing for the existence of fractional cointegration relations. The notion of fractional cointegration allows for long-term equilibria with a higher degree of persistence than allowed for in the standard cointegration framework. Over the full sample from 1999:Q1–2021:Q4, we find evidence of fractional cointegration in both inflation and industrial production among many country pairs. Our results suggest some evidence for “convergence clusters” among either core or periphery countries in the case of inflation. Similarly, we find stronger evidence of cointegration pairs among core countries for industrial production compared to periphery or mixed core–periphery groups. Testing for a break in the persistence structure, the results show evidence of a break in the persistence of both inflation and industrial production in a number of countries. Inflation persistence is substantially higher after the break, suggesting a higher potential for diverging processes during economic crises. On the contrary, for the case of industrial production, persistence is lower during the post-crisis period.
AB - This paper tests for convergence of EMU inflation rates and industrial production by testing for the existence of fractional cointegration relations. The notion of fractional cointegration allows for long-term equilibria with a higher degree of persistence than allowed for in the standard cointegration framework. Over the full sample from 1999:Q1–2021:Q4, we find evidence of fractional cointegration in both inflation and industrial production among many country pairs. Our results suggest some evidence for “convergence clusters” among either core or periphery countries in the case of inflation. Similarly, we find stronger evidence of cointegration pairs among core countries for industrial production compared to periphery or mixed core–periphery groups. Testing for a break in the persistence structure, the results show evidence of a break in the persistence of both inflation and industrial production in a number of countries. Inflation persistence is substantially higher after the break, suggesting a higher potential for diverging processes during economic crises. On the contrary, for the case of industrial production, persistence is lower during the post-crisis period.
KW - EMU inflation rates
KW - Fractional cointegration
KW - Industrial production
KW - Persistence breaks
UR - http://www.scopus.com/inward/record.url?scp=85153778266&partnerID=8YFLogxK
U2 - 10.1007/s00181-023-02426-6
DO - 10.1007/s00181-023-02426-6
M3 - Article
AN - SCOPUS:85153778266
VL - 65
SP - 2333
EP - 2356
JO - Empirical economics
JF - Empirical economics
SN - 0377-7332
IS - 5
ER -