Inflation in a fully-euroised economy: Could inflation differentials threaten competitiveness?

Abstract

This paper analyses inflation in Montenegro, a country which uses euro outside the euro area, and investigates the factors which contribute to price differentials in Montenegro relative to the euro area. Furthermore, the paper examines whether changes in the real effective exchange rates, which in Montenegròs case follow the path of price differentials, may have any influence on countrỳs competitiveness.