One Market, One Money, One Price?
Source: Munich Personal Repec Archive
The introduction of the euro was intended to integrate markets within Europe further, after the implementation of the 1992 Single Market Project. The authors examine the extent to which this objective has been achieved, by examining the degree of price dispersion between countries in the euro zone, compared to a control group of EU countries outside the euro zone. They also establish the role of exchange rate risk in hampering arbitrage by estimating the euro effect for subgroups within the euro zone, utilizing differences among EU countries in participation in the Exchange Rate Mechanism. The results, in contrast with previous empirical research, suggest robustly that the euro has had a significant integrating effect.