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© 1998 Oxford University Press and the Foundation for the European Review of Agricultural Economics

research-article

Inflation, agricultural prices and economic convergence in Greece*

GEORGE P. ZANIAS

Department of International and European Economic Studies, Athens University of Economics and Business 76, Patission Street, 104-34 Athens, Greece

Received June 1, 1997;

Summary

The relationship between agricultural prices and the general price level in Greece is estimated using econometric methods for non-stationary variables, preceded by cointegration and unit root tests which deal with the complications arising from the impact of the 1973 oil shock on the price series. It is found that agricultural prices overshoot in the short-run, while the adjustment speed to the long-run inflation neutrality is slow. The results contradict previous findings for Greece while the methods used by various researchers in the past are criticised. The existence of overshooting partly explains the evolution of agricultural prices in Greece during the past two decades, while the lower inflation rates envisaged by the economic convergence programme to meet the Maastricht criteria, will cause a 15 per cent decline in real agricultural prices during the period 1994 to 1998

Keywords: agricultural prices, overshooting, cointegration analysis


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