Does European Monetary Union make inflation dynamics more uniform?

Using a nonparametric method to characterize Markovian operators, we describe the evolution of the short-run inflation processes among the EMU countries between 1996 and 2012. While a progressive clustering pattern can be outlined in the first half of the period showing that the monetary union makes price dynamics more homogeneous starting from 2004 an increase in price volatility makes the clustering pattern unstable, as the analysis of the changing points of the inflation processes confirms. Does European Monetary Union make inflation dynamics more uniform? Stefano Maria Iacus⇤ Giuseppe Porro† May 10, 2013 Abstract Using a nonparametric method to characterize Markovian operators, we describe the evolution of the short-run inflation processes among the EMU countries between 1996 and 2012. While a progressive clustering pattern can be outlined in the first half of the period showing that the monetary union makes price dynamics more homogeneous starting from 2004 an increase in price volatility makes the clustering pattern unstable, as the analysis of the changing points of the inflation processes