By Reiner Martin, Adalbert Winkler (eds.)

ISBN-10: 0230235433

ISBN-13: 9780230235434

ISBN-10: 1349305731

ISBN-13: 9781349305735

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It deliberately refrains from taking up policy issues linked to the convergence process, like inflation and the monetary policy regime, potential growth and economic policy, migration, financial development and financial integration as well as balance of payments developments. The analysis of this chapter reveals that despite notable improvements in living standards, gaps in terms of income per capita relative to the euro area remain large in the countries under review. This suggests that the challenges of real convergence will remain relevant 27 28 Real Convergence in CEE/SEE for the region even in the medium term.

4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. For an overview see Mankiw (1995). See Pritchett (1997). Borrowing from the title of the paper by Sala-i-Martin (1997). However, it could also be argued that European integration is so special that the evidence on convergence in Europe – by way of exception – confirms the rule of divergence. This line of reasoning is further developed in the literature on convergence clubs; see, for example, Baumol and Wolff (1988) and Dowrick and De Long (2003).

For all of the cohesion countries, the time span between adopting the acquis communautaire, entering the EU, becoming part of the single market, participating in the exchange rate mechanism and eventually joining the euro area was over a decade. This might help to explain why the catching-up process in the cohesion countries appears to have been somewhat smoother than current experiences in some CEE countries. 3 Current macroeconomic and financial challenges Against this background, it is important to briefly outline the main macroeconomic and financial challenges faced by the countries in Central and Eastern Europe.

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Real Convergence in Central, Eastern and South-Eastern Europe by Reiner Martin, Adalbert Winkler (eds.)


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