Consumer Price Effects of Joining the European Economic and Monetary Union: Modeling the Post-accession Price Adjustment of Greece
DOI:
https://doi.org/10.18034/abcjar.v7i2.79Keywords:
Consumer, Price adjustment, Economy, Monetary Union, GreeceAbstract
This study shows how the Consumer Price Index of Greece is affected by joining the European Economic and Monetary Union. The post-accession price adjustment of Greece is also modeled. The research design employed in the study consists of descriptive statistics, chi-square test and regression analysis. The accession of Greece to the European Economic and Monetary Union (EMU) in 2001 and the introduction of the euro in 2002 were followed by a sharp upward shift of the consumer price level. This increase in consumer price level has given birth to a widely held hypothesis that claims that the accession of Greece to the EMU has caused a structural increase in the consumer price level. In this study this hypothesis is tested and rejected. There was no substantial evidence of such an effect of the aftermath of joining the EMU. However, there was strong evidence of structural breaks in the Greek consumer price equilibrium and of the presence of a non-linear price adjustment model. This study addresses the adjustment behavior of the consumer price level, and finds that the shift in prices after the accession to EMU is normal equilibrium restoring adjustments.
Downloads
References
Arghyrou, M. C. (2007), “The price effects of joining the euro: modeling the Greek experience using non-linear price-adjustment models.” Applied Economics, 39. pp. 493–503
Arghyrou, M. G., Martin, C. & Milas, C. (2005), “Non-linear inflationary dynamics: evidence from the UK.” Oxford Economic Papers, 57. pp. 51–69.
Arghyrou, M.G. (1997), “Causal relationships between public expenditure, public receipts and Gross Domestic Product: the case of Greece.” Discussion Paper No 373. Department of Economics. University of London, Queen Mary and Westfield College.
Arghyrou, M.G. (1997), “Greek Macroeconomic Policy in the 1990s.” The European Political Economy Series. The LSE European Institute.
Balassa, B. (1964), “The purchasing power parity doctrine: a reappraisal.” Journal of Political Economy, 72. pp. 584–96.
Ball, L, & D. Romer. (1990), Real Rigidities and the Non-neutrality of Money. Review of Economic Studies, 57. pp. 183–203.
Ball, L. & Mankiw, G. (1995), Asymmetric price adjustment and economic fluctuations. Economic Journal, 105. pp. 247-261.
Calvo, G. (1983), Staggered Prices in a Utility-Maximizing Framework. Journal of Monetary Economics, 12. pp. 383–98.
Caplin, A. & Leahy, J. (1991), State-dependent Pricing and the Dynamics of Money and Output. Quarterly Journal of Economics, 106. pp. 683–708.
Conlon, J. & Liu,C. (1997), Can More Frequent Price Changes Lead to Price Inertia? Nonneutralities in a State-Dependent Pricing Context. International Economic Review, 38. pp. 893–914.
Creswell, J. W. (2005), “Educational research.” Upper Saddle River: Prentice Hall.
Deveraux, M. B. & Siu, H. E. (2004), “State dependent pricing and business cycles asymmetries.” Department of Economics, The University of British Columbia, Discussion Paper 04–13.
Dotsey, M., King, R. & Wolman, A. (1999), State-dependent Pricing and the General Equilibrium Dynamics of Money and Output. Quarterly Journal of Economics, 114. pp. 655–90.
Grahl, J. (1997), “After Maastricht: a guide to European Monetary Union.” London: Lawrence and Wishart.
Taylor, J. (1980), Aggregate Dynamics and Staggered Contracts. Journal of Political Economy, 88.pp. 1–23.
Winkler, B. (1996), Towards a Strategic View on EMU: A Critical Survey. Journal of Public Policy, 16. pp. 1-2.
--0--
Downloads
Published
Issue
Section
License
How to Cite
