“Crises Around the World Have Been More Frequent and Deeper”—But How Do They Impact EU Convergence?

Dženita Šiljak ()
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Dženita Šiljak: Sarajevo School of Science and Technology, 71210 Sarajevo, Bosnia and Herzegovina

Economies, 2025, vol. 13, issue 8, 1-17

Abstract: This paper analyzes how two major economic downturns—a recession and a stagflation—affected convergence in the European Union (EU). Absolute and conditional convergence rates are estimated using ordinary least squares (OLS) semilog regressions based on cross-sectional data from 2004 to 2022. The study tests two hypotheses: there was no absolute convergence in the EU during either the recession or the stagflation period, and conditional convergence occurred during the recession but not during stagflation. The regression results indicate that neither hypothesis can be rejected. External variables—economic openness, inflation, and investment—were more influential during stable periods, whereas internal variables—debt, unemployment, and the control of corruption—had a greater impact during crises. These findings suggest that the EU was more institutionally prepared for the stagflation due to mechanisms developed after the financial crisis, but these tools proved less effective in addressing supply-side shocks.

Keywords: convergence; European Union; economic downturns; COVID-19 pandemic (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jecomi:v:13:y:2025:i:8:p:214-:d:1708867

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