How far from the Euro Area? Measuring convergence of inflation rates in Eastern Europe

Bettina Becker, Stephen G. Hall

Research output: Contribution to journalSpecial issuepeer-review

Abstract

Convergence has been a popular theme in applied economics since the seminal papers of Barro (1991) and Barro and Sala-i-Martin (1992). The very notion of convergence quickly becomes problematic from an academic viewpoint however when we try and formalise a framework to think about these issues. In the light of the abundance of available convergence concepts, it would be useful to have a more universal framework that encompassed existing concepts as special cases. Moreover, much of the convergence literature has treated the issue as a zero-one outcome. We argue that it is more sensible and useful for policy decision makers and academic researchers to consider also ongoing convergence over time. Assessing the progress of ongoing convergence is one interesting and important means of evaluating whether the Eastern European New Member Countries (NMC) of the European Union (EU) are getting closer to being deemed ‘ready’ to join the European Monetary Union (EMU), i.e. fulfilling the Maastricht convergence criteria.
Original languageEnglish
Pages (from-to)788–798
Number of pages11
JournalEconomic Modelling
Volume26
Issue number4
Early online date17 Apr 2009
DOIs
Publication statusPublished - Jul 2009

Keywords

  • convergence
  • inflation rate
  • European Monetary Union
  • principal components analysis

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