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MONETARY INTEGRATION, INFLATION CONVERGENCE AND OUTPUT SHOCKS IN THE EUROPEAN MONETARY SYSTEM
Author(s) -
WESTBROOK JILLEEN R.
Publication year - 1998
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1998.tb01701.x
Subject(s) - convergence (economics) , economics , inflation (cosmology) , monetary policy , monetary economics , output gap , macroeconomics , keynesian economics , physics , theoretical physics
Studies on monetary convergence in Europe have reached mixed conclusions, raising questions about whether the European Monetary System failed to expedite convergence, or whether convergence requires redefining. A definition of convergence is explored that conditions monetary policy on factors affecting real exchange rates. Inflation rates have converged, while unconditional monetary policies have not. Once conditioning factors are considered, much of the gap between inflation and monetary convergence is explained. Differences in output trends do not explain the gap, while velocity variability does. (JEL F33)