Mojmir Helisek,

University of Finance and Administration,

Prague, Czech Republic,

mojmir.helisek@vsfs.cz

PERSPECTIVES OF THE ACCESSION OF THE CZECH REPUBLIC

TO THE EURO AREA IN TERMS OF THE PRICE LEVEL CONVERGENCE

ABSTRACT. The replacement of the national currency with the euro is subject not only to the nominal convergence, but also to the real convergence of the country acceding to the monetary union. By default, the price levels convergence criterion is expressed as a deviation of the acceding country’s price level from the average price level of the euro area. However, this method is not well suited to measure price convergence. The weighted deviation of the Czech price level from the price level of the key trading partners of the Czech Republic is more appropriate. According to such new indicator, the Czech price level is 6.6 pp closer to the price level of the euro area compared to the traditional indicator.

Received: May, 2015

1st Revision: June, 2015

Accepted: July, 2015

DOI:10.14254/2071- 789X.2015/8-2/3

JEL Classification: E31, F36, F45

Keywords: Euro   area,   real   convergence,   price   convergence, comparative price levels