Abstract
Using unit labor cost (ULC) data from Euro area countries as well as US States and German Lander we investigate inflation convergence using different approaches, namely panel unit root tests, cointegration tests and error-correction models. All in all we cannot reject convergence of ULC growth in EMU. However, country-specific deviations from the rest of the currency union are much more pronounced and much more persistent in Europe than in the US or Germany. This holds before and after the introduction of the common currency. Hence, asymmetric shocks in the future might take a long time to dissipate.
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