Price convergence in the EMU?Evidence from micro data

The establishment of European monetary union (EMU) was widely expected to causeprice convergence among member states. In an investigation of this claim, the presentstudy avoids problems of comparability and representativeness by using an extremelydetailed and comprehensive scanner database on washing machine prices and salesvolumes for 17 European countries. A hedonic regression yields country-specific timeseries for quality-adjusted price differentials. Statistically and economically significantdeviations from the LOP emerge. Log t tests firmly reject price convergence amongEMU countries. Small convergence clusters can be identified but they are unrelated toEMU membership.[...] Christoph Fischer