Inflation Convergence Within the European Union: A Panel Data Analysis

This paper investigates the question of whether there exists evidence in support of inflation convergence within the European Union. The analysis also focuses on whether the Exchange Rate Mechanism (ERM) helped to accelerate inflation convergence in its member countries. The results of this paper are supportive of convergence. The countries which continuously participated in the narrow ERM bands show a dramatically higher convergence rate during the period following establishment of the mechanism.