Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/175745
Authors: 
Diaz del Hoyo, Juan Luis
Dorrucci, Ettore
Heinz, Frigyes Ferdinand
Muzikarova, Sona
Year of Publication: 
2017
Series/Report no.: 
ECB Occasional Paper 203
Abstract: 
In the euro area, there is mixed evidence that the GDP per capita of lower-income economies has been catching up with that of higher-income economies since the start of monetary union. The significant real convergence performance of some of the most recent members contrasts with that of the economies of southern Europe, which have not met expectations. However, attributing all the blame for this outcome to the introduction of the single currency simply misses the point. By taking a "long view" and reviewing the evidence since the 1960s, this paper shows that certain member countries began to face a "non-convergence trap" long before the euro years. We also provide stylised facts on: (i) the central role of total factor productivity in driving real convergence in the euro area over time, alongside other factors; and (ii) the crucial interaction of real convergence with "Maastricht convergence" and institutional quality, the other two key components of sustainable economic convergence. We conclude that it is critical that the euro area countries facing convergence challenges enhance the resilience of their economic structures by improving the relevant institutions and governance.
Subjects: 
sustainable economic convergence
real convergence
nominal convergence
GDP per capita
Maastricht convergence criteria
institutional quality
labour productivity
total factor productivity
Five Presidents' Report
Reflection Paper on the Deepening of EMU
JEL: 
E01
F15
J11
O11
O43
O47
O52
O57
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2865-6
Document Type: 
Research Report

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