Coming Together or Falling Apart? An Analysis of Real Convergence in the Euro Area (original) (raw)

Real Convergence in the Euro Area: Mirage or Reality?

Journal of Competitiveness, 2022

The aim of this paper is to study the convergence patterns in the European Union and the Euro Area between 2000 and 2019 by means of the absolute and conditional β- and σ-convergence, considering cohesion not opposite but complementary to competitiveness. By estimating cross-sectional regressions, we have found evidence favouring the absolute β-convergence for the Eurozone (19) and the European Union, illustrating that the initially poorer members experienced higher GDP per capita growth rates than the developed economies. The average catching-up speed recorded between 2000 and 2019 in the European Union was 2.5%, while in the Eurozone (19), it was 2.3%. Based on panel data and seemingly unrelated regressions, we have illustrated that improvement in the competitiveness of Member States by promoting investment, trade openness, high levels of labour productivity, education and the implication of citizens in society positively influenced the GDP per capita growth rates between 2000 and...

Economic convergence in the EU and Eurozone

Journal of Economic Studies, 2019

Purpose The purpose of this paper is to analyse whether several groups of European countries are on track for real “conditional” economic convergence in per capita income and the likely speed of convergence. The paper focusses also on the changes of the convergence processes over time. Design/methodology/approach Unlike the simple “absolute convergence”, it explores the concept of “conditional” or “club” convergence. Moreover, it adopts the approach of extending the univariate model to take into account the panel dimension over an extended time interval and endogeneity. Findings A process of real economic convergence has characterised the period under investigation (1995–2016), but, in general, the size and significance of the parameter is greater for the wide European Union (EU) area (EU25 and above) rather than the Eurozone (EZ). However, the crises occurred after 2008 caused most of such lower convergence in the Euro area. Research limitations/implications This paper gives an est...

Real Convergence Across the Euro Area

Intereconomics

This paper studies the relationship between real convergence in the euro area and macroeconomic imbalances. It compares the main features of convergence within the euro area with other EU and non-EU country groups, looking at both ‘sigma’ and ‘beta’ convergence in output and total factor productivity. Expected convergence paths for euro area countries are estimated using growth regressions run on a large panel of advanced and emerging market economies and compared to actual growth. The findings support the view that EU and euro area countries display similar convergence patterns to those of other country groups, while the group of countries that adopted the euro first exhibit relatively weak convergence since before the financial crisis. Such differences could be partly linked to relatively low dispersion in per capita incomes across this country group, although lack of convergence is also largely due to persisting differences in total factor productivity performance. The findings a...

The relations of real and nominal convergence in the EU with impacts on the euro area participation

Real convergence of economies in macroeconomic terms is accompanied by convergence of nominal variables. The paper provides an analysis of the relationship of the GDP per capita development as an indicator of the real convergence and the development of the comparable price level as a representative of the nominal convergence in relation to the EU average value in the EU economies. Using the concept of convergence, the development of variability of real and nominal convergence indicators among the EU and euro area economies is also evaluated. The Maastricht criteria are an alternative concept of the nominal convergence and their fulfilment interacts with the convergence in previous conceptions. The aim of the paper is to detect relationships between the real and nominal convergence via given indicators within the EU economies, with impacts on the euro area participation regarding the obligations to comply with the Maastricht criteria. In this sense the impacts on the new Member States are taken into account. It is clear that countries of the EU with lower levels of GDP per capita also achieve lower price levels and that simultaneous real and nominal convergence is likely to occur in these countries. The Maastricht criteria may lead to negative effects on the catching up economies joining the euro area, which experience simultaneous real and nominal convergence in the above mentioned conceptions. Keywords β and σ convergence, comparative price level, GDP per capita, Maastricht criteria, real and nominal convergence .

Real convergence in the new eu member states

Prague Economic Papers, 2008

This paper presents the analysis of unconditional and convergence among the ten European countries that accessed the European Union in 2004. Unconditional convergence means that the less developed countries (with lower GDP per capita) grow faster than the more developed countries (with higher GDP per capita). convergence exists when income differentiation among economies decreases over time. Our results confirm the existence of both types of convergence in the second half of the 1990s and the 2000s. The poorer New EU Member States grew generally faster than the richer New EU Member States. As a result, the income gap among these countries has decreased (although it still remains quite large). The convergence occurred at the rate of 2.87% in the years 1995-2006 and 3.23% in 1996-2006. This result is very similar to the results of other analyses on the subject.

Nominal and Real Convergence in the Euro Area

SEA: Practical Application of Science, 2015

The problem of the economic convergence and divergence in the European economic integration process falls within the current concerns of specialists within the economic field. In this sense, the present study addresses the issues of the economic convergence and divergence analysis, both at the level of the Member States and of the candidate countries to the Economic and Monetary Union. This paper aims at the process of European economic integration on the two axes: the nominal and the real one. The analysis results show the need for prior harmonization of the real and nominal convergence process towards joining the euro area, in order to prevent slipping after the adoption of the single currency. The nominal convergence process from the candidate countries needs also a coherent setting of speed and sequence so as not to cause delays and distortions in the development of the real convergence.

Testing the convergence hypothesis in the European Union

The main objective of this study is to measure the degree of convergence in European Union-28 (EU-28) in the period from 1995 to 2012. The catch-up rates diminished for many countries in the period from 2008 to 2012, because of the negative effect of economic crisis, when the disparities among countries were larger. Three statistical tests were applied for the entire period and for the two sub-periods (1995-2007 and 2008-2012). All the statistics (T1, T2, and T3) values have indicated the existence of divergence in the EU-28 between the levels of GDP/capita in PPS. However, during the each analysed period there is an obvious decrease of the variance in the last period compared to the first period.

Real convergence in the new Member States of the European Union (Shorter and longer term prospects)

The European Journal of Comparative Economics, 2010

The success of the integration process of the new EU Member States is reflected by their nominal and real convergence performance. These tendencies are of special importance considering further enlargement of the Eurozone. The financial and economic crisis of 2008 has resulted, however, in a fundamentally new situation as regards these issues. The paper considers the experiences gained in real convergence, the catch-up processes and their future prospects. As for nominal convergence, only those factors were analysed which affect real convergence directly. In particular, the analysis focuses on the sustainability of the convergence processes. The possible trends of longer term growth and convergence processes are presented based on a qualitative analysis representing the supply side approach. 3 The analysis is aimed at revealing potentialnot insignificant-risks and threats.

Nominal, Structural and Real Convergence of the EU Candidate Countries’ Economies

Journal of Central Banking Theory and Practice

Despite the significant academic interest in the economic cohesion, the various aspects of convergence and the ways they can be measured still remain theoretically unclear. These are issues of extreme political significance, especially for countries aspiring for EU and euro area membership. The goal of this paper is to consolidate a variety of theoretical views on the convergence and its measurement and use it as the basis to assess the progress and the current state of economic convergence to the EU of the four candidate countries. The interrelation between the three forms of convergence in the different phases of the economic cycle is studied and the slobs in the ways the convergence is measured are outlined. The study reveals large differences between the candidate countries in achieving convergence with the EU. Their experiences do not confirm the positive relationship between nominal and real convergence. The structural convergence considered as convergence of sectoral structur...

Evidence for Economic Convergence in the Eu: The Analysis of Past Eu Enlargements

Technological and Economic Development of Economy, 2015

This paper discusses the evidence of economic convergence in the European Union during the past several decades and consecutive EU enlargements. We cluster different member states of the European Union by groups representing countries that joined the EU together and analyze whether these clusters converge against each other. In addition, we analyse whether there is a convergence within different groups of countries. We employ real GDP per capita in its seasonally adjusted version as the measure of convergence. Our results reveal that there is not much evidence about the existence of economic convergence within the European Union.