An empirical estimation of Balassa – Samuelson Effect in case of Eastern European Countries

Integration into the European Monetary Union (EMU) and adoption of Euro became a specific objective for Eastern European Countries after their accession into the European Union. This objective implies specific nominal and real economic convergence for these countries within a given period of time (Copenhagen criteria). Nominal convergence measurement is based on well-defined system of economic indicators (Maastricht and Amsterdam criteria). Real convergence refers to real economic performance of a country and it is commonly associated with GDP growth rate and productivity level. From a broader perspective, real and nominal convergence could be seen as complementary. Tensions between real and nominal convergence are tested through Balassa – Samuelson Effect. In this paper it is analyzed the evolution of nominal and real convergence based on a proposed set of indicators and it is estimated Balassa-Samuelson Effect on non-Euro countries.