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Weltwirtschaftliches Archiv

, Volume 129, Issue 2, pp 207–215 | Cite as

Common stochastic trends and inflation convergence in the EMS

  • Guglielmo Maria Caporale
  • Nikitas Pittis
Articles

Abstract

Common Stochastic Trends and Inflation Convergence in the EMS. — This article seeks to clarify the relationship between the concept of convergence and univariate and cointegration analysis by looking at inflation convergence within the EMS. We take issue with the view put forward by Artis and Nachane, who hold that cointegration of inflation in Germany with inflation in the other EMS countries is a necessary condition for the “german leadership” thesis to stand. We think that, on the contrary, as long as convergence is still in the process of being achieved, inflation differentials are likely to be non-stationary and, if so, to exhibit common stochastic trends. However, our empirical results, based on Phillips-Perron tests and on the maximum likelihood framework developed by Johansen to test for common trends and cointegration, confirm the validity of the German leadership hypothesis.

Keywords

Inflation Rate Real Exchange Rate Cointegration Analysis European Monetary System Inflation Differential 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Zusammenfassung

Gemeinsame stochastische Trends und Konvergenz der Inflation im EWS. — In diesem Aufsatz soll die Beziehung zwischen dem Konzept der Konvergenz und univariater Kointegrations-Analyse geklärt werden, indem die Inflationskonvergenz im EWS betrachtet wird. Ausgangspunkt ist die Ansicht von Artis und Nachane, die die Kointegration der Inflation in Deutschland mit der in den anderen EWS-Ländern als eine notwendige Bedingung für die These von der “deutschen Führung” ansehen. Dagegen wird hier die Ansicht vertreten, daβ - solange sich die Konvergenz noch herausbildet - die Inflationsunterschiede eher nichtstationär sind und demnach gemeinsame stochastische Trends aufweisen. Die empirischen Ergebnisse, die auf Phillips-Perron-Tests und auf dem von Johansen im Rahmen der Methode der gröβten Dichte entwickelten Verfahren zur Prüfung von gemeinsamen Trends und Kointegration beruhen, bestätigen allerdings die Hypothese der deutschen Führungsrolle.

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Copyright information

© Institut fur Weltwirtschaft an der Universitat Kiel 1993

Authors and Affiliations

  • Guglielmo Maria Caporale
  • Nikitas Pittis

There are no affiliations available

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