Rate of price convergence in EU countries

The process of price convergence in the EU Member States in the years 1995-2011 was investigated in this research. The period under examination was rich in many intensive activities aimed at integrating the Community. According to economic theory, it is expected that these processes, reflected in the elimination of trade barriers, increasing market transparency, increasing competition, create appropriate environment for price convergence towards the fulfillment of the law of one price. The process of sigma and beta price convergence was tested. The division of goods into tradables and non-tradables was taken into consideration. The results for all UE Members were compared with those for Eurozone countries and the so-called old and new Member States. In the face of the global financial crisis and the crisis in the European Union, analysis was performed on the corresponding sub-periods. The investigation of price dispersion in the European Union was performed with regard to the dispersion in domestic markets. The analysis was based on data from Eurostat. Econometric methods for panel data were estimated, including Prais-Winsten fixed effects estimator, Baltagi-Wu GLS method. The process of beta convergence was detected with half -life differentiated from less than a year for the Eurozone countries to just over three years for the EU-25. A special value-added of this research is the analysis of the so-called natural level of price dispersion