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The Nominal And Real Convergence:A Real Problem For A Single Currency Area

Author

Listed:
  • Cristian Păun

    (Bucharest University of Economic Studies)

  • Ștefan Ungureanu

    (Bucharest University of Economic Studies)

Abstract

The introduction of the Euro currency, which replaced a number of local European currencies, is one of the most interesting monetary experiments. This project was presented to have a lot of advantages for the participants to this single currency area, such as comparable prices, lower trading costs, lower risks, etc. The specific requirements which have been arbitrarily established in order to adopt the Euro were called “nominal convergence criteria”. Additionally, an undefined “real convergence” was claimed as an argument for postponing the replacement of the local currency with a regional one. This paper discusses this specific problem of economic convergence (real and nominal) as a prerequisite for being accepted as a member of a single currency area. We explain the (in)significance of such condition for the stability or optimality of this kind of monetary arrangement.

Suggested Citation

  • Cristian Păun & Ștefan Ungureanu, 2015. "The Nominal And Real Convergence:A Real Problem For A Single Currency Area," Review of Social and Economic Issues, Romanian-American University, vol. 1(2), pages 29-49, march.
    • Handle: RePEc:rau:rseijr:v:1:y:2015:i:2:p:29-49
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    References listed on IDEAS

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    3. Frankel, Jeffrey, 2004. "Real Convergence and Euro Adoption in Central and Eastern Europe: Trade and Business Cycle Correlations as Endogenous Criteria for Joining EMU," Working Paper Series rwp04-039, Harvard University, John F. Kennedy School of Government.
    4. Jora Octavian-Dragomir & Topan Mihai-Vladimir & Musetescu Radu-Cristian, 2008. "European „c” quest: community, competitiveness, convergence, cohesion. what should the “eu new comer romanians” aim for?," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 343-349, May.
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