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A MODEL TO ESTIMATE THE EFFECT OF GLOBAL CRISIS ON THE CONVERGENCE PROCESS IN EU

Lucian Albu

New Trends in Modelling and Economic Forecast (MEF 2011), 2012, vol. 1, issue 1, 11-27

Abstract: There are evidences that the actual global crisis affected the convergence process in EU. Generally, just new adhered countries were more affected by the actual crisis. Today all forecasts are suffering by uncertainty. There are different opinions regarding how deep and how long the convergence process will be affected. Synthetically, the pessimistic authors are viewing the future economic dynamics as one of so-called L type or U type or W type. Coming from lessons done by standard economic growth theories (Ramsey model, Solow-Swan model, Mankiw, Romer, and Weil model, etc.) and empirical evidences, we are considering the convergence in the level of income per capita as a result of structural changes in economy. In a first part of the study we investigate the differences among countries in EU in terms of the share in total economy of main sectors. Then, based on the spatial (empirical) distribution of such shares in EU we are proposing a model to estimate a typology of the convergence process in the European area. Taking into account the existing differences among sectors in matter of productivity, there are two versions of the model: one considering the share of sectors in total employment and the other one in GDP. Finally, we are using the model to evaluate the negative impact of actual crisis on the convergence process, how deep and how long it will be prolonged, how investment and consumption are affected.

Keywords: convergence; structural changes; spatial distribution; simulation model (search for similar items in EconPapers)
JEL-codes: C13 C31 E21 E27 O11 O47 O52 (search for similar items in EconPapers)
Date: 2012-01
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Working Paper: A model to estimate the effect of global crisis on the convergence process in EU (2011) Downloads
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New Trends in Modelling and Economic Forecast (MEF 2011) is currently edited by Bogdan OANCEA and Nicolae-Marius JULA

More articles in New Trends in Modelling and Economic Forecast (MEF 2011) from ROMANIAN ACADEMY – INSTITUTE FOR ECONOMIC FORECASTING, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences Contact information at EDIRC.
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