IDEAS home Printed from
   My bibliography  Save this article

Can We Have Both? - Real and Nominal Convergence


  • Kateøina Šmídková


Candidate countries for accession to the EU often view EU convergence criteria as difficult given that the period of faster growth that real convergence necessitates is usually associated with higher inflation. This paper argues that it is important to focus on the mechanism of real convergence in this regard. If economic growth is accelerated by virtue of the closing of a technology gap, the processes of nominal and real convergence can indeed be compatible. In order to analyze this hypothesis, model simulations were run for five accession countries assuming a scenario in which FDI increases exogenously. The model used for simulation is a modified version of the model used in a related research project of Barrell, Holland, Kovacs, Jakab, Smidkova, Sepp, and Cufer (2001). According to simulation results, CPI falls and GDP per capita increases compared to the baseline following the introduction of an FDI shock. Although the results are not identical for all five countries, the hypothesis of compatibility of convergence criteria is generally supported.

Suggested Citation

  • Kateøina Šmídková, 2001. "Can We Have Both? - Real and Nominal Convergence," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 51(6), pages 376-387, June.
  • Handle: RePEc:fau:fauart:v:51:y:2001:i:6:p:376-387

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    nominal and real convergence; foreign direct investment;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fau:fauart:v:51:y:2001:i:6:p:376-387. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lenka Herrmannova). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.