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Is Central and Eastern Europe converging towards the EU-15?

Marcin Grela, Aleksandra Majchrowska, Tomasz Michałek, Jakub Mućk, Agnieszka Stazka-Gawrysiak, Grzegorz Tchorek and Marcin Wagner
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Marcin Grela: Narodowy Bank Polski
Aleksandra Majchrowska: Narodowy Bank Polski, University of Lodz
Tomasz Michałek: Narodowy Bank Polski
Grzegorz Tchorek: Narodowy Bank Polski, University of Warsaw
Marcin Wagner: Narodowy Bank Polski

No 264, NBP Working Papers from Narodowy Bank Polski, Economic Research Department

Abstract: This paper is about the real convergence of six Central and Eastern European economies – Bulgaria, the Czech Republic, Hungary, Poland, Romania, and Slovakia – towards the more advanced EU-15 economies. Our major goal is to analyse empirically which factors have driven growth and convergence in the region in the last two decades. The results of our analysis based on a panel of 26 EU countries in 1997–2014 suggest that the real convergence was driven by both traditional (core) and ‘new growth theory’ growth factors (among other things, by innovation activity and trade). We demonstrate that the post-transition growth model prevailing in the CEE region, based on a large inflow of foreign capital (mainly in the form of FDI) has reached its limits. The CEE countries’ growth and convergence will now be driven mainly by factors affecting structural competitiveness, especially innovation activity, institutional environment and policies (or lack thereof) targeted at diminishing the influence of demographic developments on the labour market outcomes.

Keywords: real convergence; growth; Central and Eastern Europe; EU; panel data analysis (search for similar items in EconPapers)
JEL-codes: F43 O47 O43 O11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-tra
Date: 2017
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