Testing for inflation convergence between the Euro Zone and its CEE partners

Abstract

Inflation convergence between the Euro Zone and its CEE partners is investigated using panel data methods that incorporate structural shifts. Strong rejections of the unit root hypothesis are found, and therefore evidence of PPP, in the East-European countries for the 1995:1 to 2000:4 period.

Notes

¹ Note that as we implement a one sided test a calculated statistic smaller than the critical value leads to the rejection of the null of a unit-root. At 5% for instance the critical value is −1.65.