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Publication Date


Document Type

Honors Project




Inflation (Finance)-European Union countries, Convergence (Economics), Purchasing power parity, Euro, Foreign exchange rates-Econometric models, Inflation convergence, Law of one price, Exchange rate mechanism, Dickey Fuller unit root test


This thesis investigates the effects of different stages of European economic and monetary integration on inflation convergence within the European Union (EU). Using both annual and monthly inflation rate data for the six founding EU members, I examine how inflation convergence has been influenced by the major events of the EU economic integration. I also evaluate the effects of adopting a common currency on inflation convergence by examining inflation rates of both the euro and non-euro EU members in the post euro adoption period. Using a variety of tests, I find strong evidence of inflation convergence within the EU and less volatility of inflation rates among the euro members.




36 p. Honors project-Smith College, Northampton, Mass., 2012. Includes bibliographical references (p. 34-35)