Links between Real and Nominal Convergence in the New EU Member States: Implications for the Adoption of Euro
Links between Real and Nominal Convergence in the New EU Member States: Implications for the Adoption of Euro

Summary/Abstract: This paper analyses the relationships between real and nominal convergence in the new post communist member states and on this basis evaluates the potential benefits and risks connected with joining the euro. The analysis observes both the common problems of catching-up economies and the dissimilarities and peculiarities influenced by the differences in the macroeconomic parameters in individual countries. The regression analysis shows interdependence between the comparative price and wage level and the income per capita level. The benefits connected with elimination of exchange rate risks and reduction of transaction costs are compared with the disadvantages associated with the loss of an independent monetary policy and an adjusting exchange rate mechanism. Attention is paid to a potential impact on real convergence of the observed countries.

• Details
• Contents