Price Convergence in the Eurozone: Panel Smooth Transition Regression Models

The purpose of this article is to discuss price convergence within the Eurozone using Smooth transition models. The analysis focuses on annual data taken in logarithm. Indeed, our sample includes twelve Eurozone countries: Austria, Belgium, Portugal, Spain, the Netherlands, Italy, Luxembourg, Ireland, Greece, France, Finland and Germany. The study period runs from 1990 to 2018. These data are extracted from the OECD and Eurostat websites. The results found show that convergence is non-linear, and the speeds of adjustment are different depending on the country. This is explained by the differences in the evolution of price competitiveness and the rigidities of the labor market.