The literature on optimum currency areas states that large inflation differentials can undermine monetary union. In the euro area, inflation rates diverged after the creation of the single currency, but started to converge again from mid-2002. Against this background, we assess the convergence...

This paper investigates changes in the causal structure linking the G-7 short-term rates by using a sequential test for the constancy of the adjustment coefficients in error correction equations. This technique allows us to detect permanent structural breaks in the causal linkages. In this...