Economic Convergence between the Western Balkans and the New EU Member States (EU-13)

Abstract

The aim of the paper is to investigate if the Western Balkan countries converge towards the new Member States of the European Union, the EU-13. The analysis is focused on beta convergence, defined as a tendency of poor countries to grow faster than rich countries. The analysed period is 2004-2017, with two sub-periods; 2004-2008 and 2009-2013. The subdivision is made in order to test the research hypotheses that the recent financial crisis negatively affected the absolute and conditional convergence process of the Western Balkans towards the EU-13. The relationships between per capita GDP growth rate and selected macroeconomic variables are econometrically tested and the empirical results support the convergence hypothesis. The convergence rates range 1.3%-3.6%. The negative effects of the crisis on convergence are not confirmed, i.e., the convergence rates during the crisis period are the highest among the analysed periods. The poorer countries should open their economies and maintain stable inflation and debt, as economic openness and inflation have a positive impact on per capita growth in the analysed countries, while general government debt has a negative impact.

Keywords

• beta convergence
• western balkans
• european union
• new member states
• transition
• financial crisis