Work detail

Convergence of the Czech Republic towards the EU (in Comparison with Other Candidate Countries)

Author: Mgr. Ctirad Slavík
Year: 2003 - summer
Leaders: PhDr. Michal Hlaváček Ph.D.
Work type: European Integration
Language: Czech
Pages: 89
Awards and prizes: M.A. with distinction from the Dean of the Faculty of Social Sciences for an excellent state-final examination performance and for an extraordinarily good masters diploma thesis
Abstract: Regression analysis of real convergence and its relation to nominal convergence reveals, that the Czech Republic is an outlier in both cases, growing slower and having lower prices, than it should with its level of real GDP per capita according to the concept of  - convergence and Balassa -- Samuelson effect, respectively. As for the Maastricht criteria, we state a relatively solid performance of the Czech Republic with the exception of government deficits. Because of existing appreciation pressures, we emphasize the importance of correct central parity setting at the moment of entering the ERM2 and of future interpretation of the exchange rate criterion. We argue that participation in ERM2 should be minimized in time (2 years). We use econometric methods (ADF tests of stationarity) to test for convergence of inflation, both in a univariate time series and panel data setting (method Levin, Lin). We interpret convergence among candidate countries and towards the EU first of all on the grounds of initial transformation shock. Convergence speed has been reduced, which is in line with this hypothesis. Finally, inflation convergence means closing of the inflation differentials channel of price level convergence, that in the BS effect follows from the process of real convergence.
Downloadable: Diploma Thesis - Slavík


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