Acta academica karviniensia 2011, 11(2):156-164 | DOI: 10.25142/aak.2011.032

REAL CONVERGENCE TRENDS IN CENTRAL AND EASTERN EUROPEAN COUNTRIES TOWARDS EUROZONE: TIME-VARYING CORRELATION APROACH

Petr Rozmahel

Ing. Petr Rozmahel, Ph.D., Výzkumné centrum, Provozně ekonomická fakulta, Mendelova univerzita v Brně, 613 00 Brno, petr.rozmahel@mendelu.cz

The paper deals with an actual issue of the Euro adoption in the Central and Eastern European countries. The main goal is to assess the preparedness of candidate European countries to adopt the Euro from a perspective of the theory of Optimum Currency Areas (OCA). The measure of dynamic similarity of business cycles of selected Central and Eastern European countries (CEE), Baltic countries and the Eurozone was applied in the analysis. This measure indicates dynamic convergence trends of the CEE and Baltics towards the Eurozone. Business cycle correlation belongs to characteristics listed within a frame of the New Theory of Optimum Currency Areas approach. Particularly, the rolling window correlation of Gross Domestic Product and Industrial Production time series were applied to asses the dynamic moments in the evolution of similarity in business cycles of the analysed European candidate countries and the Eurozone. The results shed some light on continuing convergence process in Baltic, CEE countries and Eurozone. A possible impact of a beginning of the global financial crisis on the business cycle correlation results are also discussed in the text.

Keywords: business cycle, convergence, correlation, Eurozone, optimum currency areas

JEL classification: E32, F41

Published: June 30, 2011  Show citation