Nominal and Real Stochastic Convergence of the BRICS Economies

This study sheds light on the real and nominal economic convergence and the time-varying convergence speed of Brazil, Russia, India, China, and South Africa (BRICS). This paper also employs panel data models and a Malmquist index to analyze the mechanism of real economic convergence. The study finds evidence of real convergence in monthly growth of output (industrial production) of the BRICS economies, where the speed of convergence increases in the post-crisis period. Economic convergence is also witnessed by physical capital per capita and total factor productivity (TFP). However, lack of monetary convergence is apparent in nominal interest rate spreads, monetary aggregate M2, and the price level. Although the BRICS economies are converging to a fully-fledged economic and trade union, such convergence is not echoed by their monetary aggregates and price levels. Finally, the evidence of technological progress is expected to promote labor productivity and to further accelerate economic convergence.

OCA Indexes and Convergence Process in Europe

This paper evaluates the European monetary convergence for period 2001 and 2013. The main purpose of this contribution is the estimation of the so-called OCA index, which indicates the proximity of two economic areas. The paper is theoretically based mainly on the research of Bayoumi and Eichengreen (1997), and Horváth and Komárek (2003). Selection and calculation of variables precedes the econometric analysis, and those variables correspond to the basic characteristics of an optimum currency area. Although the estimated model fulfills the conditions of economic and econometric verifications, its explanatory capabilities are significantly reduced due to the limited set of input data. Results of the analysis point to relatively stable values of indices in the period, but their further examination of the development in time reveals a steady deterioration in the case of almost all economies. That means that the convergence process was not proven because a decrease in OCA indexes values over the time was not observed. According to the results of comparison, methodological approach of the OCA indexes cannot be considered reliable because minor differences in calculation give different outputs.

21. Economic and Monetary Union

This chapter examines the Economic and Monetary Union (EMU), focusing on its key components and what happens when countries join. EMU has been an integral part of European integration since the early 1970s. Member states agreed that there should be economic and monetary convergence prior to launching EMU. However, there are some member states (such as the UK) that did not want to join EMU. The chapter first explains what economic and monetary policy is before discussing various theoretical explanations, both economic and political, accounting for why EMU was created. It also considers some criticisms of EMU and how EMU has fared under the global financial crisis and the sovereign debt crisis. It concludes by reflecting on what the future of the European Union will be with EMU in place.