Divergent Inflatin in Euroland: A Phillips Curve approach to the EMU-12
Independent thesis Advanced level (professional degree), 20 credits / 30 HE creditsStudent thesis
This thesis investigates the cause and implications of the divergent inflationrates of the EMU-12 countries between the years 1998 and 2010. The EMUand the euro are put into a context with the classic theory of Optimum CurrencyArea, where the economic benefits and cost of joining a monetary unionis reviewed. The inflation divergence in the euro area is then described and investigated.Empirically, a Phillips Curve model is constructed in order to determineif the EMU-12 nations’ inflation rates are equally sensitive to changesin unemployment as the EMU average. This is done using a Panel Least Squareestimation for the EMU-12. Each nation is then tested separately against theEMU average. The result provides evidence that the EMU-12 nations’ inflationrates are not equally sensitive to changes in unemployment as the EMU average.The result is negative for the EMU-12 in an Optimum Currency Area context.Given the results, the EMU-12 cannot be considered to be an OptimumCurrency Area, at least not yet.
Place, publisher, year, edition, pages
2011. , 39 p.
EMU, euro, Optimum Currency Area, Phillips Curve
IdentifiersURN: urn:nbn:se:hj:diva-15411OAI: oai:DiVA.org:hj-15411DiVA: diva2:423444
UppsokSocial and Behavioural Science, Law
Johannsson, SaraWarda, Peter