NOMINAL AND REAL CONVERGENCE OF SERBIAN PRICE LEVEL AND REAL INCOME TOWARDS EURO AREA
NOMINAL AND REAL CONVERGENCE OF SERBIAN PRICE LEVEL AND REAL INCOME TOWARDS EURO AREA

Summary/Abstract: To become one of the more developed countries Serbia has to attain higher growth rates in order to converge in real income. Low price level relative to more developed countries assumes that the process of convergence in income levels should be followed by a process of price convergence. We estimated linear relationship between the price level and real income that shows positive correlation and that can be interpreted that countries with higher income are characterized by higher prices. This paper aims to describe the current position of Serbia relative to other European countries as well as to quantify the relationship between the level of real income and the price level. The results of this research also suggest what would be the relative changes in price levels as a consequence of the increase in real income.

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