A Disparity Between Economic Alignment and Nominal Convergence Zdeněk Tůma Czech National Bank 13th Dubrovnik Economic Conference June 29, 2007

EU Entry Entry to the EU is linked to many institutional changes These, however, were introduced well in advance of entry itself As a consequence, no rapid changes in macroeconomic development were expected in connection with the entry date Nevertheless, export growth, for instance, increased substantially

EU Entry

Economic Alignment Despite these positive effects, the level of synchronization of the business cycle and economic shocks between the newcomers and the EU core remains relatively weak The CNB prepares an analysis of economic alignment with the eurozone on a yearly basis (available at www.cnb.cz)

Economic Alignment Correlation of real GDP growth (2 methods; period 2001-2006; source: Eurostat, calculation CNB)

Economic Alignment Correlation of demand and supply shocks with the euro area (source: CNB calculation) demand shocks supply shocks

Nominal Convergence In contrast to economic alignment, the process of nominal convergence is going well

Three Years On … Positive effects on economic development Level of economic alignment remains weak Nominal convergence (inflation and nominal interest rate) has occurred Is this enough to enter EMU?

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