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Comparative Price Level (Cpl) – A Representative Parameter of Economic Convergence

Author

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  • Emilian Dobrescu

    (Centre for Macroeconomic Modelling, National Institute for Economic Research, Romanian Academy)

Abstract

On the nominal side of economic convergence, the functional compatibility is globally reflected in the comparative price level (CPL). This is approximated through the ratio of the purchasing power parity of a given currency to its market exchange rate. The present paper examines the behavior of this variable in the European Union context, namely 19 countries already forming the Euro Zone, and the other nine ones that have to be also integrated into this common currency area. A simple analytical framework of CPL is skaetched, the main attention being paid to revealing its deep connection with the economic development level. An extended empirical analysis, covering 20-year statistical series (1995-2014) for all the 28 members of the European Union is presented. The particular position of the Romanian economy is separately examined. The previous evolution of Romania’s CPL as against the EU level is completed by an econometric attempt to forecast it for the years 2015-2016. The simulations based on updating the 2012 Version of the Romanian Macromodel were used. Some conclusions and further research suggestions finalize the paper.

Suggested Citation

  • Emilian Dobrescu, 2015. "Comparative Price Level (Cpl) – A Representative Parameter of Economic Convergence," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 7-28, December.
    • Handle: RePEc:rjr:romjef:v::y:2015:i:4:p:7-28
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    References listed on IDEAS

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    Cited by:

    1. Emilian DOBRESCU, 2017. "Modelling an Emergent Economy and Parameter Instability Problem," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 5-28, June.

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    More about this item

    Keywords

    economic convergence; comparative price level; macromodel; simulations;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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