Mihai Gheorghe (e-mail: mihai.gheorghe@insse.ro)
National institute of Statistics, Romania
Abstract
The creation of both the Economic and Monetary Union and of the single common market have meant two very important steps in getting a more and more compact Union. The first step regarding EMU lead to the adoption of a single currency and to the elimination of the exchange rates fluctuations, while the second one lead to the elimination of physical, administrative and technical barriers in order to achieve a sustainable economic growth and a stimulation of competition.
Romanian authorities set out a new target year for the Euro adoption. Technically, the euro adoption as of 1 January 2019 would imply participation in the ERM II starting 1 January 2016 for the minimum 2-year stay. During this period the EU authorities will assess whether Romania meet the determined criteria for entering the third stage of EMU.
The purpose of the paper is to assess the nominal and real convergence of Romanian prices, before and after the admission to the European Union (EU). The paper provides a short presentation of technical consideration of the both indices used to measure the price convergence, namely Harmonized Indices of Consumer Prices (HICP) and the price level estimated in the PEC framework.
A retrospective analysis since the EU admission show that in Romania, the inflation measured by the harmonized index of consumer prices has been on a downward trend, but is still relatively high, at an average rate of 3,2% in 2013.
In Romania the price level is significantly lower as compared to the EU 15 average (46%), most probably this is due to the low per capita income level. In addition, the poor marketing and the low reputation of the domestic goods and services can also be regarded as factors reducing the convergence of prices in Romania and the EU.
Keywords: price convergence, inflation, price index, purchasing power parities, price level
