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Economic Convergence and Divergence in Europe

Economic Convergence and Divergence in Europe

Growth and Regional Development in an Enlarged European Union

Edited by Gertrude Tumpel-Gugerell and Peter Mooslechner

This highly topical book addresses the challenge of economic convergence within Europe, beginning with a thorough review of the theory of growth and related empirical research. Historical and more recent economic developments within the present EU and current accession countries are discussed, along with the design for the process of further integration of accession countries into the EU and the Euro area. Moreover, the potential to achieve a sustainable catch-up process in Western Balkan countries, the Ukraine and Russia is explored, focusing on the task facing the EU in designing proper policies vis-à-vis these countries. The contributors’ varied perspectives ensure that the theories and policies postulated are linked closely with the actual situation in accession countries and offer up-to-date insights.

Chapter 15: How to balance real and nominal convergence? The case of Poland

Pawel Durjasz and Jakub Borowski

Subjects: economics and finance, regional economics, urban and regional studies, regional economics


Pawe- Durjasz and Jakub Borowski l 15.1. INTRODUCTORY REMARKS The current EU and EMU enlargement agenda poses numerous challenges for macroeconomic policy in the accession countries in general and for monetary and exchange rate policy in particular. One of the key issues which should be resolved in the run-up to accession is finding a balance between real and nominal convergence. While the former is generally associated with the process of closing the income gap between the EU and the aspirant countries, the latter reflects the necessity to pursue an effective control over nominal variables such as the inflation rate and other closely related measures of nominal convergence (interest rates, exchange rates). Stated differently, central banks in the accession countries are faced with the problem of finding an optimum between the indisputable benefits stemming from real convergence and the costs attributable to the process of delivering price stability. Once viewed from the institutional perspective, this choice reflects the necessity to cope with the Maastricht convergence requirements while simultaneously watching for the Copenhagen criterion on the capacity to cope with competitive pressures and market forces within the Union. This chapter addresses the dilemma and its implications for the future stance of monetary and exchange rate policies in Poland. Before analysing various aspects of the optimum-choice problem outlined above, let us highlight the theoretical background of the real convergence phenomenon and its relation to the issue of nominal convergence. The theoretical underpinnings of real convergence originate from...

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