This paper analyses the convergence between price and nominal exchange rate variations towards the equilibrium level established by the relative version of purchasing power parity (PPP), in the context of the European Union. It presents thece novelties with respect to the great majority of preceding works in this field: it is a multicountry study, it adopts a dynamic approach and this work uses monthly observations at very high level of desaggregation (22 sectors). The results indicate that in no case is the PPP satisfied when the period of variation is very short (one or only few months). However, they also point out that this relationship does hold with longer time spans that do not exceed the period of observation (1985-1992). Although the evidence is favourable to PPP in each of the sectors considered in this study, important differences can be found among them, both in the speed of adjustment and in the way in which the convergence to equilibrium takes place.

Keywords: purchasing power parity, real exchange rate, economic integration.