Convergence, inequality and inflation synchronization: evidence from the Eurozone

Bo owski, Jakub; Fid muc, Ja ko; Jawo ski, K ys ian
A icle — Published Ve sion
Con e gence, inequali y and in la ion synch oniza ion:
e idence om he Eu ozone
Empi ica
P o ided in Coope a ion wi h:
Sp inge Na u e
Sugges ed Ci a ion: Bo owski, Jakub; Fid muc, Ja ko; Jawo ski, K ys ian (2025) : Con e gence,
inequali y and in la ion synch oniza ion: e idence om he Eu ozone, Empi ica, ISSN 1573-6911,
Sp inge US, New Yo k, NY, Vol. 52, Iss. 3, pp. 413-433,
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Empi ica (2025) 52:413–433
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ORIGINAL PAPER
Con e gence, inequali y andin la ion synch oniza ion:
e idence om heEu ozone
JakubBo owski1 · Ja koFid muc2,3,4 · K ys ianJawo ski1
Accep ed: 26 Janua y 2025 / Published online: 4 Ma ch 2025
© The Au ho (s) 2025
Abs ac
This pape s udies he impac o eal con e gence in he EU coun ies on in la ion
synch oniza ion be ween hese coun ies and he Eu ozone. In la ion co-mo emen
be ween he Eu ozone and he EU coun ies se es as an impo an measu e o he
adequacy o he single mone a y policy o bo h cu en and u u e membe s o he
common cu ency a ea. We epo h ee majo esul s. Fi s , coun ies wi h highe
ela i e GDP pe capi a in he EU coun ies epo s onge in la ion co-mo emen .
Second, he ela ionship be ween eal con e gence and he in la ion synch oniza ion
is non-linea . Thi d, lowe income inequali y is associa ed wi h g ea e in la ion co-
mo emen . Ou indings sugges ha eal con e gence in he EU is associa ed wi h
s onge in la ion synch oniza ion be ween he EU coun ies and Eu ozone and mo e
e ec i e common mone a y policy in he long un. These esul s p o ide suppo o
he “co ona ion heo y” which unde sco es ha mone a y in eg a ion should ollow,
a he han p ecede, he p ocess o eal con e gence. We show ha o he ca ching-
up coun ies wi h ela i ely high GDP pe capi a he alue o wai ing o he income
gap o na ow is limi ed as addi ional con e gence implies only mode a e inc ease in
in la ion co-mo emen .
Keywo ds Real con e gence· In la ion synch oniza ion· Mone a y union·
Inequali y· Panel da a eg ession
JEL Classi ica ion C23· E31· E32· E42· O15· O47
1 In oduc ion
The ising equency o signi ican mac oeconomic shocks has p omp ed a wa e o
empi ical esea ch on in la ion synch oniza ion. Mos s udies poin o inc easingly
synch onized in la ion in e na ionally o e ime, wi h ad anced economies ha ing
Responsible Edi o : Jesus C espo Cua esma.
Ex ended au ho in o ma ion a ailable on he las page o he a icle
414
Empi ica (2025) 52:413–433
he s onges in la ion co-mo emen . Elsayed e al. (2021) highligh a high deg ee
o in eg a ion be ween he oil p ice in la ion and CPI in la ion in G7 coun ies and
China. They also show ha his ela ionship is ime- a ying and has been ising o e
ime, especially du ing oil c isis and episodes o inancial s ess. Ha e al. (2019a
and 2019b) show ha in la ion mo emen s ha e become inc easingly synch onized
o e ime and in la ion synch oniza ion is b oad-based and obse ed no only in
de eloped economies bu also eme ging ma ke and de eloping coun ies. Thei
indings poin o imp o emen s in economic policy ins i u ions and s onge global
ade linkages as ac o s explaining g ea e in la ion synch oniza ion. Sza anek
(2021) shows ha in la ion synch oniza ion ac oss ad anced, eme ging and leas
de eloped economies s eng hens along wi h he uni ica ion o mone a y policy
amewo ks igge ing simila policy esponses, he alling independence o cen al
banks and he launch o uncon en ional mone a y policy by he Fede al Rese e.
In la ion co-mo emen in ad anced and eme ging economies is also a ec ed by oil
p ice shocks. He also poin s o he inc eased synch oniza ion in business cycles as
a d i e o p ice co-mo emen s in he EU economies. Shin and Kang (2023) show
ha a e 2008 he impo ance o global ac o s in explaining he na ional in la ion
a es in 29 coun ies has ema kably inc eased and highe global in la ion synch o-
niza ion is mainly d i en by ising impo ance o he non-commodi y global ac o
a he han ha o commodi y global ac o .
The issue o in la ion synch oniza ion is pa icula ly ele an o he Eu ozone, as
di e ging in la ion ajec o ies in a mone a y union cause disc epancies in domes ic
eal in e es a es which may des abilise he mone a y union (Wal e s 1990). These
a e di e en ials may lead o coun y-speci ic boom-and-bus cycles o excessi e
mone a y igh ening, which would unde mine he e ec i eness o common mon-
e a y policy. Using a s ylized wo-coun y model o a mone a y union Landmann
(2012) shows ha an inc ease in he eal in e es a e di e en ials in a mone a y
union is a des abilizing elemen in a cu ency a ea wi h a single nominal in e -
es a e. He a gues ha he ime needed o he sys em o con e ge o equilib ium
depends on he e ec i eness o he compe i i eness channel (highe p ices lead o
lowe ne expo s and educed in la iona y p essu e) and he adjus men p ocess is
inhe en ly agile and p o ac ed. Wha ollows a e slow-mo ion boom-bus cycles in
he coun ies sha ing common cu ency leading o desynch onized cyclical luc ua-
ions deemed “ o a ing slumps” (Blancha d 2007). The e o e, he issue o in la ion
synch oniza ion in he Eu ozone can be seen h ough he lenses o op imum cu -
ency a ea (OCA) heo y which accen ua es he low incidence o asymme ic shocks
as one o he key cha ac e is ics o a well- unc ioning mone a y union (Dellas and
Ta las 2009).
Empi ical indings sugges ha he Eu ozone coun ies ha e shown a high deg ee
o in la ion in e dependence. Lopez and Papell (2012) ind ha a e he implemen-
a ion o he Maas ich T ea y, in la ion a es con e ged in wel e ini ial eu o coun-
ies. They also show ha he pe sis ence o in la ion a e di e en ials declined sig-
ni ican ly a e he in oduc ion o he single mone a y policy. Ál a ez e al. (2021)
documen in la ion co-mo emen in ad anced economies and show ha in la ion
synch oniza ion is pa icula ly s ong among eu o a ea coun ies. They associa e his
esul wi h subs an ial ade linkages and common mone a y policy sha ed by eu o
415
Empi ica (2025) 52:413–433
a ea membe s a es. Magkonis and Sha ma (2019) ocus on ansmission channels o
in la ion be ween he pe iphe y and he co e o he eu o a ea. They show ha po en-
ial in la iona y o de la iona y shocks in he pe iphe y a e ansmi ed o he co e
(Ge many) and ansmission wo ks bo h ways. Gi en he p ominence o he in la ion
synch oniza ion wi hin he OCA amewo k, he unde pinnings and sus ainabili y
o in la ion co-mo emen in he EU will likely emain high on he esea ch agenda.
This pape con ibu es o he in la ion co-mo emen li e a u e in he ollowing
ways. Fi s , we ocus on he long- e m de e minan s o in la ion synch oniza ion
and iden i y he c oss-coun y di e ences in GDP pe capi a as a ac o explaining
in la ion synch oniza ion be ween he EU membe s a es and he eu o a ea. In la ion
co-mo emen be ween an EU coun y and he eu o a ea p o ides in o ma ion on
he alignmen o he single mone a y policy wi h he in la ion cycle in ha coun y.
Fo a eu o a ea coun y, low in la ion co-mo emen sugges s ha he single mon-
e a y policy is episodically oo es ic i e o oo expansiona y, he eby inc easing
ou pu ola ili y and educing wel a e in ha coun y. Fo a non-eu o a ea coun-
y, low in la ion co-mo emen poin s o an inc eased isk o an inapp op ia e single
mone a y policy a e joining he common cu ency a ea and gi ing up mone a y
independence. The e o e, he ques ion o whe he in he long un in la ion synch o-
nisa ion wi h he eu o a ea is ela ed o c oss-coun y di e ences in GDP pe capi a
dese es pa icula a en ion. Second, we analyse he e olu ion o in la ion synch o-
niza ion in he pe iod o ising GDP pe capi a owa ds and beyond EU a e age.
We show ha he impac o eal con e gence on in la ion co-mo emen is non-lin-
ea and becomes nega i e once GDP pe capi a ma kedly exceeds he EU a e age.
Thi d, we ind ou ha income inequali y is ela ed o in la ion synch oniza ion in
he EU coun ies and his esul highligh s he ole o he iscal policy in he OCA
amewo k.
1.1 Theo e ical backg ound
Th oughou his pape we use he e m “income gap”, which is de ined as he di e -
ence in GDP pe capi a be ween an EU coun y and he EU a e age. Fo ca ching-up
coun ies, he income gap is nega i e, while o high-income coun ies i is posi i e.
The income gap should no be con used wi h he ou pu gap, which e e s o he di -
e ence be ween cu en and po en ial ou pu . Ou p e e ed measu e o he income
gap is he di e ence in GDP pe capi a in PPS (pu chasing powe s anda ds), which
is a be e measu e o di e ences in pu chasing powe be ween coun ies han GDP
pe capi a a ma ke exchange a es.
The ques o he connec ion be ween income gap and in la ion co-mo emen
is based on ollowing p emises. Fi s , acco ding o he new ade heo y, educing
he income gap leads o highe sha e o in a-indus y ade in o al ade. Helpman
(1981, 1987) in eg a ed he Hecksche -Ohlin model (explaining in e -sec o al ade)
wi h Chambe lin- ype app oach o p oduc di e en ia ion, economies o scale and
monopolis ic compe i ion (explaining in a-indus y ade). The esul ing gene aliza-
ion o he Heckshe -Ohlin heo y indica es ha he edis ibu ion o ac o endow-
men s which inc eases he di e ence in he capi al-labo a ios leads o a educ ion
416
Empi ica (2025) 52:413–433
o he sha e o in a-indus y ade in he o al olume o ade. In o he wo ds, i he
di e ence in capi al-labo a ios is la ge, coun ies may p oduce signi ican ly di -
e en g oups o commodi ies, which esul s in a low sha e o in a-indus y ade
(i.e. ade in simila p oduc s wi h ho izon ally di e en ia ed a ie ies o ade in
e ically di e en ia ed p oduc s dis inguished by quali y and p ice). As highe
capi al-labo a io leads o a highe GDP pe capi a, i can be expec ed ha he
dec ease in he income gap con ibu es o g ea e in ensi y o in a-indus y ade.
This hypo hesis was con i med by he esul s o empi ical esea ch o OECD coun-
ies (Loe sche and Wol e 1980). I ade be ween wo economies is domina ed by
in a-indus y ade, incidence o asymme ic shocks is lowe and he con e gence
o business cycles is likely o be s onge (Fid muc 2004). G ea e synch oniza ion
o business cycles, in u n, should lead o s onge in la ion co-mo emen .
Second, in la ion synch oniza ion be ween wo economies may inc ease i hei
s uc u es o p oduc ion become mo e simila . The s uc u e o p oduc ion is an
impo an de e minan o he economy’s ulne abili y o asymme ic shocks. I he e
a e signi ican di e ences in he s uc u e o alue added ( o example, in one coun-
y he sha e o ag icul u e in alue added is ela i ely high and he sha e o ma ke
se ices is ela i ely low), he p obabili y o asymme ic shocks is high (Thimann
2005). This conclusion was con i med by he esul s o empi ical s udies indica ing
he posi i e impac o simila i y in economic s uc u es on he synch oniza ion o
business cycles (Fid muc e al. 2012; Ka adimi opoulou 2018).
Changes in he s uc u e o p oduc ion may be he esul o sec o al di e ences in
p oduc i i y g ow h a es (supply side) o sec o al di e ences in income elas ici y
o demand (demand side). The la e ela ionship means ha changes in he s uc-
u e o he economy a e he e ec o shi s in consume demand ha occu wi h
he ise in income. Assuming hie a chical p e e ences and a e he in oduc ion o
non-linea Engel cu es in o he gene al equilib ium model, Foellmi and Zweimülle
(2008) show ha along wi h he inc ease in income he e is a mono onic dec ease
in employmen in ag icul u e, a empo a y inc ease in employmen in manu ac u -
ing (in he ea ly s ages o de elopmen ) and a mono onic inc ease in he sha e o
employmen in he se ices sec o . This means ha educing he income gap is asso-
cia ed wi h simila ends in he p oduc ion s uc u es, which become mo e simi-
la . Consequen ly, hese de elopmen s lead join ly o he g owing con e gence o
business cycles. Eicheng een and Gup a (2011) came o simila conclusions. They
es ima ed polynomial eg ession o assess he impac o GDP pe capi a on he sha e
o se ices in GDP in o e 80 coun ies in 1950–2005. They iden i ied wo wa es
o g ow h in he se ices sec o — he i s in coun ies wi h a ela i ely low le el
o GDP pe capi a and he second in coun ies wi h a high le el o income. The
ob ained esul s also indica e he non-linea ela ionship be ween GDP pe capi a
and he sha e o ag icul u e and indus y (hump-shaped) in GDP. The indings o
Bue a and Kaboski (2012) a e also consis en wi h his line o easoning. They buil
a heo e ical model in which, as income inc eases, demand shi s owa ds mo e skill-
in ensi e ou pu , which con ibu es o a dec ease in he sha e o home p oduc ion
ela i e o ma ke se ices. All in all, he esul s o heo e ical and empi ical s ud-
ies indica e ha educing he income gap may lead o g ea e simila i y o p oduc-
ion s uc u es and hus g ea e synch oniza ion o business (and in la ion) cycles,

417
Empi ica (2025) 52:413–433
and his ela ionship may be non-linea . Non-linea i ies wi h espec o business and
in la ion cycles a e documen ed e.g. by C espo Cua esma e al. (2009) and C espo
Cua esma and Silgone (2014).
Thi d, educ ion in he income gap is likely o be associa ed wi h changes in
income inequali y. While Kuzne s (1955) hypo hesized a educ ion o inequali y
le els wi h g owing agg ega e income, he ecen decade has been cha ac e ized by
inc easing le els o inequali y in de eloped and eme ging economies (Fid muc and
Gundacke 2017; El-Shagi e al. 2020). In he model p oposed by Pás o and Ve o-
nesi (2021) economic g ow h leads o an inc ease in income inequali y and ise in
populism as a esponse o globaliza ion. Rod ik (2018) and Guiso e al. (2019) also
poin o globaliza ion as a sou ce o g owing populism. Populis policies can esul
in expansi e iscal and mone a y policies as well as in weakening c edi s anda ds.
These ac o s can uel a consume c edi boom (Rajan 2010; El-Shagi e al. 2020).
The e o e, ise in populism may lead o weake impac o he income gap on he
con e gence o economic luc ua ions.
Fu he mo e, Voinea e al. (2020) show ha ha households’ esponses o mon-
e a y policy depend on hei income and deb le els. The highes impac is ound
o he middle class, which is mo e indeb ed and hence mo e sensi i e o mone a y
policy changes han o he household ypes. F os and S alen (2018) ind a posi-
i e ela ionship be ween income inequali y and mac op uden ial policies. Gue ello
(2018) shows ha he impac o he con en ional and uncon en ional mone a y pol-
icy on income dis ibu ion is highly he e ogenous be ween he coun ies and ha i
shows impo an non-linea i ies. Di e ences in he ansmission mechanism and in
p uden ial policies a e also likely o lowe he in e na ional synch oniza ion o busi-
ness cycles. The e o e, ising income inequali y is likely o weaken he ela ionship
be ween income gap and synch oniza ion o business cycles.
Following he li e a u e e iew, we o mula e he ollowing esea ch hypo heses:
HA. Reduc ion o he income gap ( eal con e gence) in he EU is associa ed wi h
g ea e synch oniza ion o in la ion cycles be ween EU coun ies and he Eu ozone.
HB. The ela ionship be ween income gap and in la ion cycles synch oniza ion is
non-linea . Once a ela i ely low le el o he income gap is achie ed, he posi i e
impac o i s u he educ ion on in la ion co-mo emen becomes negligible.
HC. Income inequali y is ela ed o a lowe synch oniza ion o in la ion cycles
be ween EU coun ies and he Eu ozone.
2 Da a andme hods
2.1 Da a
Ou da ase spans om 2001 o 2022, and his ange is jus i ied by he a ailabili y
o unde lying mon hly in la ion ime se ies in he Eu os a da abase. The analysis
co e s mos EU membe s a es (excluding Luxembu g, Mal a and Cyp us, i.e. 24
coun ies). The chosen sample is a comp omise be ween he leng h o he da a se ies
and he balancing o he panel as o some EU membe s a es da a p io o 2001 is
una ailable.
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Empi ica (2025) 52:413–433
Calcula ion o in la ion cycle synch oniza ion1 is pe o med based on Ha mo-
nised Indices o Consume P ices (HICP) p o ided by Eu os a , which is a meas-
u e o in la ion ha is compa able ac oss coun ies. To measu e in la ion in e de-
pendency wi hin he Eu opean Union we used exis ing me hods p esen ed in he
li e a u e ha u ilize olling co ela ion (Dua e and Holden 2003; A is and Okubo
2009;Gäch e and Riedl 2014; Belke e al. 2017). Speci ically, he endogenous a i-
able cap u ing he synch oniza ion o in la ion is calcula ed in a ollowing way:
(1) as in la ion is subjec o signi ican seasonali y (e.g. p ices o ui and ege ables
o due o seasonal sales), he mon hly le el o p ices o goods ( o al in la ion
excluding se ices)2 i s is adjus ed using he X-13ARIMA-SEATS o emo e
any po en ial seasonali y in he da a ha may skew he esul s,
(2) hen a cyclical componen o in la ion is isola ed by de- ending he o season-
ally-adjus ed log-p ices using he Hod ick-P esco il e ,
(3) a 36-mon h olling co ela ion be ween he in la ion cycles in indi idual EU
membe s a es and he Eu ozone is calcula ed,
(4) he co ela ion o in la ion cycles in mon hly equency is agg ega ed o yea ly
equency ia a simple a e age.
As ou lined in he in oduc ion, we belie e ha educing he income gap ac s as
an impo an ac o explaining he synch oniza ion o in la ion cycles in he EU.
We measu e he income gap wi h nominal GDP pe capi a exp essed as pe cen age
o he EU a e age based on pu chasing powe pa i y, ex ac ed om he Eu os a
da abase.
We should keep in mind ha inclusion o income gap as an explana o y a iable
signi ican ly limi s he a ay o po en ial eg esso s in ou model due o mul icol-
linea i y issues. As shown in he li e a u e e iew in he Sec .2, he mos impo an
de e minan s o in la ion cycle synch oniza ion a e highly co ela ed wi h income
gap, e.g. in a-indus y ade in ensi y o specializa ion and s uc u e o p oduc-
ion. Mo eo e , hese a iables a e o en no a ailable o all analyzed coun ies,
which would es ic addi ionally he scope o p esen ed analysis. The e o e, se e al
“s anda d” exogenous a iables ound in esea ch on in la ion cycle synch oniza ion
canno be included as explana o y a iables o ou es ima ions.
We ha e also ob ained di e en measu es used o cap u e inequali y o he indi-
idual coun ies om he Wo ld Inequali y Da abase – he Gini coe icien , T10/
B50 a io ( a io o he op 10% a e age income o he bo om 50% a e age income)
o S80/S20 a io ( a io o o al income ecei ed by he 20% o he popula ion wi h
he highes income o ha ecei ed by he 20% o he popula ion wi h he lowes
income).
1 We a e using he e ms in la ion cycle co ela ion, in la ion synch oniza ion and in la ion in e depend-
ency in e changeably h oughou he pape .
2 The al e na i e esul s, which we e based on o al in la ion (p ices o bo h goods and se ices) we e
gene ally simila , howe e he goodness-o - i o he p oposed models (see Sec .4) was in e io com-
pa ed o he baseline app oach. This is likely due o a much lowe le el o in e na ionaliza ion o se ices
ma ke s compa ed o goods ma ke s, which limi s he synch oniza ion o se ice in la ion cycles, and as a
co olla y o al in la ion. These esul s can be p o ided by he au ho s upon eques .
419
Empi ica (2025) 52:413–433
The o he explana o y a iables include also he sha e o impo s om EU in
o al impo s o each coun y, which ep esen s he ade in e ac ions wi hin EU. I is
calcula ed sepa a ely o each yea based on Eu os a annual da a on goods’ o eign
ade.
Las ly, we inco po a e a a iable ep esen ing he ola ili y o p oduce p ices
in Eu ozone manu ac u ing, which se es as a global ac o in luencing in la ion
synch oniza ion. This ola ili y measu e is de i ed om he su eys conduc ed by
S&P Global as pa o he Pu chasing Manage s’ Index (PMI) o manu ac u ing.
The PMI is widely ecognized o an icipa ing shi s in economic and ma ke ends
and ac s as a key indica o o economic pe o mance and business condi ions (S&P
Global 2024). Each mon h, he PMI su ey collec s quali a i e assessmen s om
a la ge sample o businesses ega ding changes in ou pu p ices compa ed o he
p e ious mon h. Pa icipan s espond whe he p ices ha e “inc eased,” “dec eased,”
o “ emained unchanged.” These esponses a e agg ega ed in o a balance s a is ic
anging be ween 0 and 100, whe e alues abo e 50 indica e ising p ices and alues
below 50 sugges alling p ices compa ed o he p e ious mon h. To cap u e p ice
ola ili y, we calcula ed he coe icien o a ia ion ( he a io o he s anda d de ia-
ion o he mean) based on PMI ou pu p ices. This was compu ed using a mo -
ing 3-yea window, o e ing a dynamic measu e o p ice ola ili y o e ime. PMI
su eys o e a eal- ime assessmen o business sen imen on ou pu p ices, and
many s udies highligh he link be ween PMI da a and in la iona y ends. Mokinski
e al. (2015) ind ha PMI su eys a e a leading indica o o p oduce p ice in la-
ion, pa icula ly in he manu ac u ing sec o . The ola ili y o hese ou pu p ice
assessmen s, when agg ega ed ac oss coun ies, can be used o gauge in la iona y
p essu es a a global scale. The desc ip i e s a is ics o all a iables a e shown in
Table1.
2.2 Es ima ion s a egy
To in es iga e he ela ionship be ween he in la ion cycle synch oniza ion and
income gap we cons uc ed a ixed-e ec panel model, i.e. we es ima e a ollowing
eg ession:
whe e
Yi
is cap u ing he synch oniza ion o in la ion cycles be ween he i- h EU
coun y and he Eu ozone a da e , as de ined abo e (see Sec .3.1). The
GDPpci
is he GDP pe capi a exp essed as pe cen age o he EU a e age. We include also
di e en measu es o inequali y in se e al speci ica ions, deno ed by ineq. The X
k
i
ep esen o he explana o y a iables ou lined in he Sec .3.1. Pa ame e s
𝜇i
co -
esponds o indi idual e ec s o EU membe coun ies and
𝜖i
s ands o he e o
e m.
Based on a o emen ioned heo e ical li e a u e and empi ical esea ch on he
de e minan s o in la ion co-mo emen , we belie e ha he ela ionship be ween
(1)
Y
i =𝛼1GDPpci +𝛼2(GDPpci )2
+𝛼3ineqi +∑
k
𝛼kXk
i +𝜇i+𝜖i
420
Empi ica (2025) 52:413–433
Table 1 Desc ip i e s a is ics Sou ce: Own calcula ions
Va iable Yea Mean SD Min Q1 Median Q3 Max
Co ela ion o in la ion cycles 2003 0.45 0.24 − 0.31 0.34 0.43 0.62 0.80
2006 0.38 0.29 − 0.41 0.15 0.43 0.54 0.86
2009 0.85 0.14 0.47 0.79 0.90 0.95 0.99
2012 0.71 0.25 0.12 0.67 0.76 0.88 0.96
2015 0.78 0.18 0.06 0.73 0.81 0.87 0.96
2018 0.88 0.08 0.66 0.85 0.91 0.93 0.98
2021 0.94 0.03 0.82 0.94 0.95 0.96 0.98
GDP pe capi a 2003 89.34 36.67 30.50 54.70 90.85 122.78 146.50
2006 92.09 33.91 38.60 62.33 92.95 119.30 151.70
2009 91.95 30.00 43.70 64.03 91.05 118.68 139.90
2012 92.55 28.90 46.80 69.80 83.50 121.95 135.40
2015 94.60 31.79 48.10 70.08 85.65 121.73 180.80
2018 95.45 31.11 51.50 70.73 89.30 118.15 189.90
2021 98.14 34.09 57.40 74.85 89.55 120.13 218.40
Vola ili y o p oduce p ices 2003 0.02 0.00 0.02 0.02 0.02 0.02 0.02
2006 0.04 0.00 0.04 0.04 0.04 0.04 0.04
2009 0.13 0.00 0.13 0.13 0.13 0.13 0.13
2012 0.07 0.00 0.07 0.07 0.07 0.07 0.07
2015 0.02 0.00 0.02 0.02 0.02 0.02 0.02
2018 0.06 0.00 0.06 0.06 0.06 0.06 0.06
2021 0.16 0.00 0.16 0.16 0.16 0.16 0.16
S80/S20 a io 2003 4.67 1.08 3.58 4.07 4.35 4.95 6.38
2006 4.81 1.23 3.39 3.70 4.52 5.52 7.76
2009 4.80 1.15 3.24 3.94 4.48 5.82 7.40
2012 4.85 1.09 3.44 3.95 4.68 5.69 6.63
2015 5.12 1.44 3.51 4.00 4.65 6.29 8.32
2018 4.89 1.32 3.03 4.05 4.30 5.64 7.66
2021 4.78 1.28 3.20 3.85 4.28 5.81 7.45
Gini coe icien 2003 0.45 0.05 0.34 0.42 0.46 0.48 0.57
2006 0.46 0.04 0.38 0.44 0.46 0.49 0.53
2009 0.45 0.05 0.37 0.41 0.45 0.48 0.56
2012 0.45 0.04 0.39 0.42 0.45 0.48 0.54
2015 0.46 0.04 0.39 0.43 0.46 0.49 0.53
2018 0.46 0.04 0.37 0.43 0.45 0.48 0.55
2021 0.47 0.05 0.38 0.44 0.46 0.49 0.62
T10/B50 a io 2003 8.46 2.42 4.61 6.91 8.54 9.51 15.84
2006 8.94 1.94 5.46 7.43 8.68 10.13 12.82
2009 8.33 2.12 5.15 6.65 8.15 9.38 14.79
2012 8.30 1.88 5.98 6.91 8.02 9.56 13.17
2015 8.70 1.76 6.07 7.32 8.71 9.95 12.68
2018 8.54 1.96 5.42 7.38 8.21 9.62 13.99
2021 9.49 4.00 5.45 7.63 8.58 9.86 25.87
427
Empi ica (2025) 52:413–433
impo ance only in he las ew yea s. The coe icien s o di e en measu es o
income inequali y main ained he same sign as in he baseline es ima ion, al hough
some o hem los s a is ical signi icance in some speci ica ions (e.g. S80/S20 a io).
Gene ally speaking, he esul s ob ained based be o e/a e GFC samples do no di -
e a lo . The es ima ion esul s on he wo subsamples a e p esen ed in Tables3 and
4, espec i ely.
I is in e es ing o no e ha he es ima es o he in lec ion poin (
GDPpcpeak
,
i.e. he le el o GDP pe capi a beyond which he in la ion synch onisa ion s ops
o inc ease) di e signi ican ly be ween he subsamples. They a e much lowe o
he p e-GFC sample (99.9–114.5% o a e age EU GDP pe capi a) han o he
pos -GFC sample (120.5–136.9% o a e age EU GDP pe capi a). This migh sug-
ges ha in he a e ma h o signi ican global shocks he impo ance o closing he
income gap o synch onisa ion o in la ion cycles inc eases ma kedly. Such con-
clusion seems o be suppo ed by he esul s ob ained on he subsample spanning
be ween 2003 and 2019, i.e. excluding he pe iod o COVID-19 pandemic. The es i-
ma es o
GDPpcpeak
s and be ween 125.3 and 131.2% o a e age EU GDP pe cap-
i a, which is lowe han he ange ob ained based on ull sample (2003–2022), i.e.
144.8–160.6% o a e age EU GDP pe capi a. This means ha inclusion o he pan-
demic shock in he es ima ion sample unde pins he ele ance o closing he income
Table 5 Es ima ion esul s wi hou pandemic pe iod (2003–2019) Sou ce: Own calcula ions
-s a is ics in b acke s (based on D iscoll-K aay s anda d e o s e lec ing c oss-sec ion co ela ion and
au oco ela ion)
In lec ion poin (% o a e age EU GDP pe capi a)
*** p < 0.01, ** p < 0.05, * p < 0.1
Va iables Model
(1) (2) (3) (4) (5)
GDP pe capi a 0.025 0.025 0.025 0.025 0.023
(5.969)*** (5.938)*** (5.986)*** (5.474)*** (4.884)***
Squa e o GDP pe capi a − 0.00010 − 0.00009 − 0.00010 − 0.00009 − 0.00009
(− 5.782)*** (− 5.702)*** (− 5.771)*** (− 5.479)*** (− 5.295)***
Vola ili y o p oduce p ices 1.642 1.567 1.556 1.345 1.534
(1.656)* (1.598) (1.586) (1.344) (1.525)
Gini coe icien − 1.323
(− 2.406)**
T10/B50 a io − 0.022
(− 2.495)**
S80/S20 a io − 0.058 − 0.057
(− 2.122)** (− 2.067)**
Sha e o impo s om EU 0.753
(1.281)
Obse a ions 408 408 408 369 369
In lec ion poin 129.4 131.2 131.1 129.6 125.3

428
Empi ica (2025) 52:413–433
gap o inc easing he synch onisa ion o in la ion cycles. The emaining esul s do
no di e ma kedly compa ed o he baseline speci ica ion. The coe icien s o he
explana o y a iables main ain hei signs and s a is ical signi icance as in he case
o baseline esul s (see Table5 o de ails).
We also es ed, how exclusion o some coun ies impac s ou esul s. Pa icula ly,
we excluded Czech Republic, Hunga y, Poland and Romania (so called CE-4 coun-
ies) om ou es ima ion sample. These a e ou Cen al Eu opean coun ies ha
a e in he p ocess o ca ching-up wi h mo e ad anced economies, bu s ill did no
en e he Eu ozone. The esul s a e simila o he ones calcula ed o he sample
including all coun ies. The Gini coe icien and T10/B50 lose hei s a is ical sig-
ni icance, bu he S80/S20 a io main ained i . We link his esul wi h he ac ha
almos all emaining coun ies in he sample a e membe s o he Eu ozone, wi h
much less a iance in he le el o income inequali y (Table6).
Nex , we checked whe he he esul s a e sensi i e o he unde lying in la ion
indica o used o calcula e he endogenous a iable o in la ion synch onisa ion. To
do so, we e-es ima ed all he models, bu his ime we used he HICP co e in la-
ion (i.e. o e all index excluding ene gy, ood, alcohol and obacco). The esul s do
no di e ma kedly compa ed o he baseline speci ica ion. The coe icien s o he
explana o y a iables main ain hei signs, bu some o he con ol a iables los
hei s a is ical signi icance (Table7).
Table 6 Es ima ion esul s on a sample excluding CE-4 coun ies Sou ce: Own calcula ions
-s a is ics in b acke s (based on D iscoll-K aay s anda d e o s e lec ing c oss-sec ion co ela ion and
au oco ela ion)
In lec ion poin (% o a e age EU GDP pe capi a)
***p < 0.01, ** p < 0.05, * p < 0.1
Va iables Model
(1) (2) (3) (4) (5)
GDP pe capi a 0.011 0.012 0.012 0.008 0.007
(4.096)*** (3.994)*** (3.925)*** (2.72)*** (2.081)**
Squa e o GDP pe capi a − 0.00004 − 0.00004 − 0.00004 − 0.00003 − 0.00003
(− 4.065)*** (− 4.043)*** (− 3.951)*** (− 2.846)*** (− 2.525)**
Vola ili y o p oduce p ices 1.974 1.976 1.978 1.670 1.802
(2.863)*** (2.87)*** (2.872)*** (2.58)** (2.818)***
Gini coe icien − 0.244
(− 0.436)
T10/B50 a io − 0.003
(− 0.365)
S80/S20 a io − 0.042 − 0.037
(− 1.764)* (− 1.529)
Sha e o impo s
om EU
0.869
(1.871)*
Obse a ions 400 400 400 371 371
In lec ion poin 148.4 150.4 149.8 143.0 127.8
429
Empi ica (2025) 52:413–433
The inal obus ness es in ol ed exp essing all explana o y a iables in e ms
o EU a e age. The baseline speci ica ion used GDP pe capi a (and i s squa e) in
e ms o EU a e age, bu he emaining a iables we e p esen ed in hei aw o m,
which may lead o some misma ches. To emedy ha we ecalcula ed all a iables
compa ing he coun y-speci ic alues o he EU a e age. Gene ally, he esul s
emained simila as in he baseline speci ica ion (Table8). The coe icien s o he
key a iables, as well as he in ec ion poin s did no a y signi ican ly. The Gini
coe icien and T10/B50 a ios, as well as he sha e o impo s om EU main ained
hei espec i e signs bu los hei s a is ical signi icance. The explana ion is qui e
s aigh o wa d. I we see a simila , gene al end among all he EU coun ies, which
is ue in he case o dec ease in income inequali ies, hen exp essing he explana-
o y a iables as he sha e o EU a e age will esul in a eg esso ha ing almos no
a iabili y ac oss ime. This likely jus i ies he lack o s a is ical signi icance.
4 Conclusions
In la ion synch onisa ion be ween EU Membe S a es and he eu o a ea is an impo -
an measu e o assessing he adequacy o he single mone a y policy o bo h cu -
en and u u e eu o a ea membe s. Weak in la ion co-mo emen be ween an EU
Table 7 Es ima ion esul s wi h co e in la ion as an explana o y a iable Sou ce: Own calcula ions
-s a is ics in b acke s (based on D iscoll-K aay s anda d e o s e lec ing c oss-sec ion co ela ion and
au oco ela ion)
In lec ion poin (% o a e age EU GDP pe capi a)
***p < 0.01, ** p < 0.05, * p < 0.1
Va iables Model
(1) (2) (3) (4) (5)
GDP pe capi a 0.009 0.009 0.010 0.010 0.010
(3.051)*** (3.063)*** (3.164)*** (2.234)** (2.109)**
Squa e o GDP pe capi a − 0.00003 − 0.00003 − 0.00003 − 0.00003 − 0.00003
(− 2.827)*** (− 2.868)*** (− 2.869)*** (− 2.22)** (− 2.191)**
Vola ili y o p oduce p ices 2.529 2.532 2.538 2.791 2.820
(4.925)*** (4.917)*** (4.897)*** (5.636)*** (5.568)***
Gini coe icien − 0.306
(− 0.42)
T10/B50 a io − 0.010
(− 1.145)
S80/S20 a io 0.075 0.075
(2.182)** (2.183)**
Sha e o impo s
om EU
0.175
(0.363)
Obse a ions 480 480 480 441 441
In lec ion poin 157.3 160.3 163.5 160.4 158.0
430
Empi ica (2025) 52:413–433
coun y and he eu o a ea sugges s ha “one size does no i all” and ha he com-
mon mone a y policy may ampli y ou pu luc ua ions and educe wel a e in ha
coun y. We ound e idence ha ising ela i e GDP pe capi a le els in he EU
coun ies lead o s onge in la ion synch oniza ion be ween hese coun ies and he
Eu ozone and he ela ionship be ween eal con e gence and in la ion co-mo emen
is non-linea . Ou indings a e consis en wi h he s udies poin ing o he non-lin-
ea ela ionship be ween GDP pe capi a and GDP s uc u e and showing he nexus
be ween eal con e gence and synch oniza ion o business cycles.
Ou esul s ha e se e al long- e m implica ions. Fi s , ou indings show ha
in la ion synch oniza ion in he EU is ela ed o he eal con e gence. Assuming ha
– in line wi h he condi ional con e gence hypo hesis— he income gap be ween new
EU membe s a es and he EU co e con inues o sh ink, we should obse e mo e
synch onized in la ion cycles be ween hese s a es and he Eu ozone.
Second, o new EU membe s a es, ou esul s cons i u e an a gumen o seek-
ing g ea e eal con e gence be o e joining he Eu ozone, as a mo e synch onized
in la ion cycle means mo e adequa e common mone a y policy and lowe long- e m
cos s o mone a y in eg a ion. Acco dingly, hese esul s p o ide some suppo o
he “co ona ion heo y” which unde sco es ha mone a y in eg a ion should seal he
Table 8 Es ima ion esul s wi h explana o y a iables exp essed in ela ion o EU a e age Sou ce: Own
calcula ions
-s a is ics in b acke s (based on D iscoll-K aay s anda d e o s e lec ing c oss-sec ion co ela ion and
au oco ela ion)
In lec ion poin (% o a e age EU GDP pe capi a)
*** p < 0.01, ** p < 0.05, * p < 0.1
Va iables Model
(1) (2) (3) (4) (5)
GDP pe capi a 0.009 0.009 0.010 0.010 0.010
(3.051)*** (3.063)*** (3.164)*** (2.234)** (2.109)**
Squa e o GDP pe capi a − 0.00003 − 0.00003 − 0.00003 − 0.00003 − 0.00003
(− 2.827)*** (− 2.868)*** (− 2.869)*** (− 2.22)** (− 2.191)**
Vola ili y o p oduce p ices 2.529 2.532 2.538 2.791 2.820
(4.925)*** (4.917)*** (4.897)*** (5.636)*** (5.568)***
Gini coe icien − 0.306
(− 0.42)
T10/B50 a io − 0.010
(− 1.145)
S80/S20 a io 0.075 0.075
(2.182)** (2.183)**
Sha e o impo s
om EU
0.175
(0.363)
Obse a ions 480 480 480 441 441
In lec ion poin 157.3 160.3 163.5 160.4 158.0
431
Empi ica (2025) 52:413–433
eal con e gence p ocess a he han be used as a con e gence boos e . Ye i should
be no ed ha o he ca ching-up coun ies wi h ela i ely high GDP pe capi a he
alue o wai ing is limi ed as addi ional con e gence implies only mode a e inc ease
in in la ion co-mo emen .
Finally, excessi e inequali y may also in luence in la ion synch oniza ion. Ris-
ing income inequali y in coun ies ha sha e a common cu ency o seek membe -
ship in a cu ency union may lead o highe long- e m cos s o mone a y in eg a ion.
This conclusion should be seen om he pe spec i e o he OCA amewo k which
emphasises he ole o domes ic iscal policy as a po en ial sou ce o idiosync a ic
shocks.
Funding Open Access unding enabled and o ganized by P ojek DEAL. This wo k was suppo ed by he
SGHWa saw School o Economics.
Da a a ailabili y The da a ha suppo s he indings o his s udy is a ailable om he co esponding
au ho , upon easonable eques .
Decla a ions
Con lic o in e es The au ho s epo he e a e no compe ing in e es s o decla e.
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JakubBo owski1 · Ja koFid muc2,3,4 · K ys ianJawo ski1
* Ja ko Fid muc
ja ko. id [email p o ec ed]; ja k[email p o ec ed]
Jakub Bo owski
jbo o[email p o ec ed]aw.pl
K ys ian Jawo ski
kjaw[email p o ec ed]w.pl
1 Depa men o Economics II, SGH Wa saw School o Economics, Ba o ego 8, Wa saw, Poland
2 Zeppelin Uni e si y F ied ichsha en, F ied ichsha en, Ge many
3 Ins i u e o Economic Resea ch, Slo ak Academy o Sciences, B a isla a, Slo akia
4 Mendel Uni e si y, B no, CzechRepublic