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How far from the Euro area? Measuring convergence of inflation rates in Eastern Europe

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posted on 2010-02-26, 16:50 authored by Bettina Becker, Stephen G. Hall
We present a common factor framework of convergence which we implement using principal components analysis. We apply this technique to a dataset of monthly inflation rates of EMU and the Eastern European New Member Countries (NMC) over 1996-2007. In the earlier years, the NMC rates moved independently from an average of the three best performing countries over the past twelve months, while they moved somewhat closer in line with them in the later years. Looking at the sample of the EMU and NMC countries as a whole, there is evidence of a formation of convergence clubs across the two groups.

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Publisher

Dept. of Economics, University of Leicester

Available date

2010-02-26

Publisher version

http://www.le.ac.uk/economics/research/discussion/papers2009.html

Book series

Papers in Economics;09/1

Language

en

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