Does economic convergence with the European Union mean more FDI flows to an economy? Analysis on 5 Central and Eastern Europe countries

In this paper we analyze the relationship between economic convergence with the European Union (EU) and foreign direct investment flows to 5 EU countries (Bulgaria, Czech Republic, Poland, Romania and Hungary) in the period 2001 – 2010, in order to determine if the process of economic convergence with the EU level influences FDI inflows in these economies. We use an economic convergence index, made up of real and structural convergence indexes, to assess the level of economic convergence. The study does not provide us with a clear response to our question. We report a tight relationship between convergence index and FDI inflows in Bulgaria, but quite divergent evolutions of the two variables in the case of Hungary.convergence index; foreign direct investments; European Union

Laggards or performers? CEE vs. PIIGS countries’ catch-up with the Euro area in the last ten years

This research paper develops a comparative analysis between the new members states of the European Union (EU) – from Central and Eastern Europe (CEE) – and PIIGS countries (Portugal, Italy, Ireland, Greece and Spain) in terms of economic convergence with the Euro area, in the last decade. In addition, the paper emphasizes the changes in the economic convergence levels determined by the recent international crisis. In order to assess these evolutions, we compute an aggregated index of economic convergence, made up of real and structural convergence indexes. Then, by using cluster methodology, we highlight the similarities between the states in the two groups, CEE and PIIGS, from the economic convergence perspective. The comparative analysis reveals that in 2010 only Estonia, Hungary and Slovenia report resembling characteristics to PIIGS group. We also report an important progress of the countries analyzed, as regards real and structural convergence with the Euro area. However, after a decade of catching-up, Romania remains by far the most distanced country from the Euro area.real convergence, structural convergence, Central and Eastern Europe, PIIGS, clusterization

Cyclical convergence of Central and Eastern European countries to the Euro area core. New methodological approach

The current paper develops an analysis on the degree of business cycle convergence of the new member states of the EU towards the Euro area core (Germany, France, Italy, Belgium, Netherlands and Luxembourg) during 1996 – 2010.Unlike the previous research, the study takes into consideration the similarity of cycles, and not their synchronization. Furthermore, from the methodological point of view, it explores the use of survey indicators in the analysis of the cycles, thus in addition to the traditional approach that employs the GDP. The results obtained through clusterization show that the degree of convergence towards Euro area core remains modest

Cyclical convergence of Central and Eastern European countries to the Euro area core. New methodological approach

Abstract. The current paper develops an analysis on the degree of business cycle convergence of the new member states of the EU towards the Euro area core Unlike the previous research, the study takes into consideration the similarity of cycles, and not their synchronization. Furthermore, from the methodological point of view, it explores the use of survey indicators in the analysis of the cycles, thus in addition to the traditional approach that employs the GDP. The results obtained through clusterization show that the degree of convergence towards Euro area core remains modest

Laggards or performers? CEE vs. PIIGS countries’ catch-up with the Euro area in the last ten years

This research paper develops a comparative analysis between the new members states of the European Union (EU) – from Central and Eastern Europe (CEE) – and PIIGS countries (Portugal, Italy, Ireland, Greece and Spain) in terms of economic convergence with the Euro area, in the last decade. In addition, the paper emphasizes the changes in the economic convergence levels determined by the recent international crisis. In order to assess these evolutions, we compute an aggregated index of economic convergence, made up of real and structural convergence indexes. Then, by using cluster methodology, we highlight the similarities between the states in the two groups, CEE and PIIGS, from the economic convergence perspective. The comparative analysis reveals that in 2010 only Estonia, Hungary and Slovenia report resembling characteristics to PIIGS group. We also report an important progress of the countries analyzed, as regards real and structural convergence with the Euro area. However, after a decade of catching-up, Romania remains by far the most distanced country from the Euro area

Does economic convergence with the European Union mean more FDI flows to an economy? Analysis on 5 Central and Eastern Europe countries

In this paper we analyze the relationship between economic convergence with the European Union (EU) and foreign direct investment flows to 5 EU countries (Bulgaria, Czech Republic, Poland, Romania and Hungary) in the period 2001 – 2010, in order to determine if the process of economic convergence with the EU level influences FDI inflows in these economies. We use an economic convergence index, made up of real and structural convergence indexes, to assess the level of economic convergence. The study does not provide us with a clear response to our question. We report a tight relationship between convergence index and FDI inflows in Bulgaria, but quite divergent evolutions of the two variables in the case of Hungary

ROMANIA: CLIMBING THE LADDER FOR A BETTER FUTURE. WHEN WILL IT REACH EU AND EURO AREA?

In this paper we assess the evolution of Romania’s economic convergence with the European Union (EU) and Euro area, during the period 2000-2010. In order to determine the number of years required to reach the EU and Euro area average, we employ an economic convergence index, made up of real and structural convergence indexes. The analysis shows that Romania has been climbing the ladder in the process of catching-up with the EU and the Euro area until 2008 when, because of the international crisis, the economic convergence index started decreasing. We report that Romania will reach the EU average in April 2056 and the Euro area average in September 2062.As revealed by the analysis, it will take decadesto attain the European levels of economic convergence, this being the most important challenge for Romania on the long term

FISCAL DISCIPLINE AND CONVERGENCE OF THE EURO AREA CANDIDATES. CLOSER TO THE PERFORMERS OR TO THE LAGGARDS?

The objective of this paper is to examine how the current financial crisis has affected the fiscal discipline and convergence in the seven Central and Eastern European countries which have not yet joined the Euro Area (EA), namely Bulgaria, the Czech Republic, Hungary, Latvia, Lithuania, Poland and Romania. In the first part, we emphasize the importance of fiscal discipline for the effective functioning of the European Monetary Union (EMU). In the second part, by exploring the current status of the literature in this field, we identify scarce theoretical and empirical research on the non-EA countries’ fiscal discipline and convergence. In the third one, we briefly present the data and methodology used in the paper. We report the fiscal discipline of the non-EA countries by analysing their distance from the Maastricht criteria regarding the budgetary deficit and the public debt as shares of GDP in the fourth part. We also assess the fiscal convergence of the seven candidates for Euro adoption in order to understand whether they add to the strengths or to the weaknesses of the EMU, from a fiscal point of view, by employing two benchmarks: the EA core and the EA periphery. The sovereign debt crisis emphasized the asymmetry between core and periphery countries. It is of major importance to know if the EA candidates will exacerbate the fiscal imbalances by joining the periphery group of countries or by contrast, will promote fiscal discipline and sustainability alongside the core EA member states. The fifth part concludes. The non-EA group of countries has not experienced major fiscal imbalances in the last four years, but the efforts must continue in reducing the budgetary deficits and controlling the public debts. In times of crisis, the EA candidates achieved more convergence with the EA core than with the EA periphery, by reducing the distance from the EA core. This is due to a deterioration in the fiscal performance of the EA core states and not to an improvement in the non-EA group of countries. The result is not encouraging for the fiscal convergence given the fact that we would expect an improvement in the non-EA countries’ fiscal performance in order to catch-up with the best performers of the EA and not the reverse. In terms of public debt, the fiscal convergence with the EA core would not be desirable, due to the high levels of public debt achieved by these countries