Durjasz, Pawel; Borowski, Jakub --- "How to balance real and nominal convergence? The case of Poland" [2003] ELECD 21; in Tumpel-Gugerell, Gertrude; Mooslechner, Peter (eds), "Economic Convergence and Divergence in Europe" (Edward Elgar Publishing, 2003)

Book Title: Economic Convergence and Divergence in Europe

Editor(s): Tumpel-Gugerell, Gertrude; Mooslechner, Peter

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843762416

Section: Chapter 15

Section Title: How to balance real and nominal convergence? The case of Poland

Author(s): Durjasz, Pawel; Borowski, Jakub

Number of pages: 9

Extract:

15. How to balance real and nominal
convergence? The case of Poland
Pawe- Durjasz and Jakub Borowski
l

15.1. INTRODUCTORY REMARKS

The current EU and EMU enlargement agenda poses numerous challenges
for macroeconomic policy in the accession countries in general and for
monetary and exchange rate policy in particular. One of the key issues
which should be resolved in the run-up to accession is finding a balance
between real and nominal convergence. While the former is generally asso-
ciated with the process of closing the income gap between the EU and the
aspirant countries, the latter reflects the necessity to pursue an effective
control over nominal variables such as the inflation rate and other closely
related measures of nominal convergence (interest rates, exchange rates).
Stated differently, central banks in the accession countries are faced with
the problem of finding an optimum between the indisputable benefits stem-
ming from real convergence and the costs attributable to the process of
delivering price stability. Once viewed from the institutional perspective,
this choice reflects the necessity to cope with the Maastricht convergence
requirements while simultaneously watching for the Copenhagen criterion
on the capacity to cope with competitive pressures and market forces within
the Union. This chapter addresses the dilemma and its implications for the
future stance of monetary and exchange rate policies in Poland.
Before analysing various aspects of the optimum-choice problem out-
lined above, let us highlight the theoretical background of the real conver-
gence phenomenon and its relation to ...