Growth and Regional Development in an Enlarged European Union
Edited by Gertrude Tumpel-Gugerell and Peter Mooslechner
Chapter 12: Some remarks on 'How to balance real and nominal convergence': an introductory statement
12. Some remarks on ‘How to balance real and nominal convergence’: an introductory statement Peter Mooslechner Part IV includes the views of several competent representatives from the central banks of some accession countries on how to balance nominal and real convergence. Here I brieﬂy sketch the terms used and the questions involved. The term ‘nominal convergence’ relates to the process of nominal variables approaching stability levels. These variables comprise mainly the level of inﬂation, the size of exchange rate movements and the level of long-term interest rates. In addition, ﬁscal variables are often included. The corresponding Maastricht criteria for participation in the euro area can be seen as target points for the nominal convergence process. ‘Real convergence’ is often related to the adjustment of economic structures or to the building of an institutional and legal framework. However, the most commonly used dimension of real convergence relates to levels of economic development. In other words, to the catching up of poorer countries’ income per capita levels (calculated at the exchange rate) to a certain target level of income per capita, for instance the level of a benchmark country or the average level of several countries. This catching up can take place through real growth diﬀerentials, through price level convergence (via real appreciation) or through both of these. While the authors in Part III describe various aspects of real convergence achievements in terms of structural change to date, Part IV focuses on the interlinkage between real and nominal convergence...
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