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An empirical estimation of Balassa – Samuelson effect in case of eastern european countries

Paun, Cristian (2010): An empirical estimation of Balassa – Samuelson effect in case of eastern european countries. Published in: Oeconomica Journal - Working Paper , Vol. 1, (15. March 2009)

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Abstract

Integration into the European Monetary Union (EMU) and adoption of Euro became a specific objective for Eastern European Countries after their accession into the European Union. This objective implies specific nominal and real economic convergence for these countries within a given period of time (Copenhagen criteria). Nominal convergence measurement is based on well-defined system of economic indicators (Maastricht and Amsterdam criteria). Real convergence refers to real economic performance of a country and it is commonly associated with GDP growth rate and productivity level. A closer look reveals that real and nominal convergence could be seen as complementary. But contradiction between real and nominal convergence are revealed by Balassa – Samuelson Effect. In this paper it is analyzed the evolution of nominal and real convergence based on a proposed set of indicators and it is estimated Balassa-Samuelson Effect on non-Euro countries.

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