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Convergence and macroeconomic imbalances

Author

Listed:
  • Leonor Coutinho
  • Alessandro Turrini

Abstract

This section looks at the relationship between convergence patterns across the euro area and dynamics following the unwinding of imbalances. It compares the main features of convergence within the euro area with that of other country groups. It looks at both ‘sigma’ and ‘beta’ convergence, in relation to output and total factor productivity (TFP), conditioning on relevant variables that affect long-run growth. Expected convergence paths for euro area countries are estimated using growth regressions run on a large panel of advanced and emerging market economies. Our findings suggest that macroeconomic imbalances such as high private and government debt or strong growth in the non-tradables sector can hamper economic convergence. Overall, the analysis underscores the importance of conditions that ensure macro stability and resilience for economic convergence.

Suggested Citation

  • Leonor Coutinho & Alessandro Turrini, 2019. "Convergence and macroeconomic imbalances," Quarterly Report on the Euro Area (QREA), Directorate General Economic and Financial Affairs (DG ECFIN), European Commission, vol. 18(1), pages 37-51, July.
    • Handle: RePEc:euf:qreuro:0181-03
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