Financial convergence of the Republic of Macedonia with the European Union
Financial convergence of the Republic of Macedonia with the European Union

Summary/Abstract: In this paper we explore the issue of financial convergence of the Republic of Macedonia with the EU. The purposes of our analysis is to determine the degree to which the domestic financial markets have become more similar to european financial markets. Is it interesting for several resons. First, the country, the Republic of Macedonia, considered were centrally planned economy with undeveloped financial services. The transition path to a market economy was very uneven in the beginning due to delayed structural reforms and bed macroeconomic policies. As a result is achivied some markedly better outcomes, but there is greater room for the imporvement in terms of increase of per capita income and price stability. These differences might have influenced also the process of integration of the domestic financial sector with with those of the EU states. Secondly, the removal of barriers to factor mobility (a prerequisite for an economic union) implies convergence of the factor returns. Since capital tends to be relativly more mobile than labour, for example, the price aqualization should take place more rapidly. The state od financial integration is aslo important from a policy making point of view. Well integrated markets are characterized by faster and more complete transmission of changes in the monetary policy.The analysis in this paper will be base on two approaches to measuring convergence which have been originally developed in the growth literature-cross-sectional measures and compared with to the European standards- cointegration analysis.

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