The Effects of the Crisis on Convergence between the Eastern Partnership and EU-15 States

Dzenita Siljak and Sandor Nagy

Economic Studies journal, 2021, issue 7, 3-18

Abstract: This paper aims to investigate the effects of the 2008/2009 financial crisis on the convergence process of the Eastern Partnership (EaP) countries towards the core countries of the European Union (EU-15). To do so, we econometrically test the relationship between the per capita GDP growth rate and selected macroeconomic variables in the period 2004–2018 and three sub-periods: the pre-crisis, the crisis, and the post-crisis period. We hypothesize that the financial crisis had a negative impact on the absolute and conditional convergence process in the analyzed group of countries. The convergence rates are estimated using ordinary least squares (OLS) semi-log regression based on cross-sectional data. The empirical results show that the EaP countries converge towards the EU-15 Member States and that the convergence rates range between 1.6% and 4.3%. Negative effects of the financial crisis on the convergence process are confirmed only for absolute convergence. The two groups of countries form separate clusters, which indicates a considerable heterogeneity of growth. According to the results of this research, the EaP countries should focus on opening their economies to more trade, increase macroeconomic stability and decrease corruption, because improvement in these areas should lead to a faster convergence process.

JEL-codes: F15 O47 O52 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:bas:econst:y:2021:i:7:p:3-18

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