Abstract
The subject of the article was to study a price convergence of the Czech Republic (CR) and Euro zone countries in the two aspects: spatial and time aspect. In the first one the convergence of selected economies to the Euro zone average price level was researched. In the second one the convergence or divergence process was studied in the individual years of the analysis. The main aim was to prove the hypothesis that the price level of the CR converged to the average price level of the Euro zone in the selected time period 1995-2010. An analysis was conducted by the panel data regression model. The data of comparative price levels of GDP (CPL) used in the analysis were obtained in the Eurostat database.
Highlights
The nominal convergence can be understood in the two ways - the wide or narrow understanding
The broad perception at the nominal convergence is associated with the fulfillment of the Maastricht Convergence Criteria (MCC), which consist of the fiscal criteria, followed by monetary criteria
Vintrová and Žďárek (2007) included the price convergence to the nominal convergence which they understand as the fulfillment of the Maastricht convergence criteria required for joining the Euro zone
Summary
The nominal convergence can be understood in the two ways - the wide or narrow understanding. The broad perception at the nominal convergence is associated with the fulfillment of the Maastricht Convergence Criteria (MCC), which consist of the fiscal criteria (public finance deficit, public debt), followed by monetary criteria (price stability, exchange rate stability, the stability of long-term nominal interest rates). The fulfillment of the MCC of the Czech Republic (CR) is a subject to an annual report named Assessment of the Fulfillment of the Maastricht Convergence Criteria and the Degree of Economic Alignment of the Czech Republic with the Euro Area. The Czech Republic did not fulfill the criterion of the sustainability of the public finances in 2011 (since 2009 the CR is in the excessive deficit procedure). The Czech Republic fails to accomplish the exchange rate stability criterion because it is not a member of the exchange rate mechanism ERM II. The criterion of the long-term interest rate stability is fulfilled regularly and it is predicted the same in the short term
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