Price levels convergence of consumer expenditures in the European Union

Abstract

The convergence of price levels is one of the important aspects of a real convergence and is often viewed as a criterion for the evaluation of preparedness. The convergence process of comparative price levels can run either through the exchange rate channel and/or that of nominal prices. The paper is focused on the assessment of comparative price levels and the rate of their convergence in the enlarged European Union within the period of 1999-2003. With the exception of Cyprus, the price levels in the new EU member countries were significantly lower. The greatest differences from the price level of EU countries existed in Poland, Slovakia and Baltic countries. The new member countries differ also in the rate of convergence. When combining their initial position and the rate of convergence, it can be concluded that all countries will be able to reach 80% of the comparative price level of the European Union till the year 2010. In Poland, the development is very unfavourable because its price level will reach only 55% provided that there will be no changes in its development.

Keywords

• european union
• eu-enlargement
• comparative price level
• consumption expenditures