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Convergence and Divergence

  • Guinevere Nell
  • Marcello Signorelli

Abstract

There are certain patterns, which economists have noticed and studied, in the growth of economies globally and regionally. Economies influence each other, and at times some appear to converge, in terms of growth or other indicators, to meet others. Empirical studies are used to track this phenomenon, in which economies become more alike, and economists also build dynamic models to explore the potential causes. These may include trading patterns and influence of other countries through foreign investment, as well as through an internal change of institutions, such as when economies transition between socialist and free market economic systems. Divergence of economic systems may also occur, as well as convergence and divergence of smaller economic areas and groups of areas. This chapter examines the various kinds of convergence and divergence that are most actively being examined, both real and nominal, and how their existence has influenced policy choices, especially the European Currency Union. We conclude with an examination of the challenges facing transition economies, especially those posed by reforms undertaken for the purpose of meeting with European Currency Union guidelines and laws, and the specific issues for least developed economies.

Keywords

European Union Monetary Union Cohesion Policy Labour Market Performance Club Convergence 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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© Guinevere Nell and Marcello Signorelli 2015

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  • Guinevere Nell
  • Marcello Signorelli

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