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Real and Nominal Convergence and the New EU Member States - Actual State and Implications

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  • Václav Žďárek
  • Jaromír Šindel

Abstract

This paper analyses the process of nominal and real convergence of the new Member States of the European Union. It also discusses theoretical and methodological issues relating to this process. The importance of nominal and real convergence is underlined in connection with a successful catching-up. The EU-10 economies experienced robust economic growth in recent years, which had a positive impact on the convergence process. Although this favourable development of real convergence (GDP per capita in PPS) is accompanied by a simultaneous price (nominal) convergence (changes in relative prices and a convergence of price levels), the comparative price level is still biased towards lower level in comparison with the per capita income.

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Bibliographic Info

Article provided by University of Economics, Prague in its journal Prague Economic Papers.

Volume (Year): 2007 (2007)
Issue (Month): 3 ()
Pages: 195-219

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Handle: RePEc:prg:jnlpep:v:2007:y:2007:i:3:id:305:p:195-219

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Related research

Keywords: relative price level; nominal and real convergence; competitiveness; Balassa-Samuelson effect;

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References

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  1. Balázs �gert, 2007. "Real Convergence, Price Level Convergence and Inflation in Europe," Working Papers 267, Bruegel.
  2. Dubravko Mihaljek & Marc Klau, 2003. "The Balassa-Samuelson effect in central Europe: a disaggregated analysis," BIS Working Papers 143, Bank for International Settlements.
  3. Philipp Rother & Ralph Süppel, 2003. "East Germany, Central Europe, and the Risk of Real Convergence Overshooting," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 53(9-10), pages 374-393, September.
  4. Piritta Sorsa, 2006. "Macroeconomic Challenges with Eu Accession in Southeastern Europe," IMF Working Papers 06/40, International Monetary Fund.
  5. Galor, Oded, 1996. "Convergence? Inferences from Theoretical Models," Economic Journal, Royal Economic Society, vol. 106(437), pages 1056-69, July.
  6. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
  7. György Szapáry, 2000. "Maastricht and the Choice of Exchange Rate Regime in Transition Countries During The Run-Up to EMU," MNB Working Papers 2000/7, Magyar Nemzeti Bank (the central bank of Hungary).
  8. Kocenda, Evzen & Kutan, Ali M. & Yigit, Taner M., 2006. "Pilgrims to the Eurozone: How far, how fast?," Economic Systems, Elsevier, vol. 30(4), pages 311-327, December.
  9. Canzoneri, Matthew B & Diba, Behzad & Fudey, Gwen, 1996. "Trends in European Productivity and Real Exchange Rates: Implications for the Maastricht Convergence Criteria and for Inflation Targets after EMU," CEPR Discussion Papers 1417, C.E.P.R. Discussion Papers.
  10. Anne-Marie Brook, 2005. "The Challenges of EMU Accession Faced by Catching-up Countries: A Slovak Republic Case Study," OECD Economics Department Working Papers 444, OECD Publishing.
  11. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
  12. Balázs Egert, 2005. "The Balassa-Samuelson Hypothesis in Estonia: Oil Shale, Tradable Goods, Regulated Prices and Other Culprits," The World Economy, Wiley Blackwell, vol. 28(2), pages 259-286, 02.
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