In this paper, we examine the determinants of inflation differentials in a panel of the new European Union member … level in the new EU members is associated with narrower inflation differential vis-à-vis the euro area, while fiscal deficit … and positive output gap seem to contribute to higher inflation differential. Nevertheless, the effect of price convergence …

inflation observed in the European catching-up countries, which suggests that other factors may be at play. In these and related … non-traded sectors) on the dual inflation differential is more than twice as large as that in the "flexible" countries. We … conclude that, in a catching-up country, premature euro adoption may foster excess inflation, beyond that which is to be …