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Economics Research International
Volume 2012 (2012), Article ID 868216, 15 pages
http://dx.doi.org/10.1155/2012/868216
Research Article

Food Price Inflation Rates in the Euro Zone: Distribution Dynamics and Convergence Analysis

Department of Agricultural Economics & Rural Development, Agricultural University of Athens, 75 Iera Odos Street, 11855 Athens, Greece

Received 1 March 2012; Revised 9 August 2012; Accepted 17 August 2012

Academic Editor: José M. Gil

Copyright © 2012 Angelos Liontakis. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

It is widely recognized that inflation as a monetary phenomenon is determined by money supply changes. In the short run, however, several factors may lead to inflation rate differentials among different regions in the same country or among different countries in a monetary union. This paper examines the mean reversion attitude of food price inflation rates in the Euro zone, borrowing the concepts and developments from the recent growth literature and using panel unit root tests. Additionally, in order to capture sufficiently the evolving distributional dynamics, nonparametric econometric methods are also implemented. Finally, the comovement of the inflation rates among different food subgroups is also explored. The data consist of monthly observations of the EU harmonized consumer price indices of food and three different food subgroups (meat, bread and cereals, and vegetables) for the 12 older member states of the Euro zone, covering the period from 1997 to 2010. The results do not fully support the hypothesis of the food price inflation rates convergence for the whole period under investigation. Mean reversion shows up in different time periods and in different food categories. Moreover, the analysis of distribution dynamics sheds light to different aspects of convergence and highlights processes like club formation and polarization.