Economic Convergence and Divergence in Europe
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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.
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Chapter 12: Some remarks on 'How to balance real and nominal convergence': an introductory statement

Peter Mooslechner


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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