Konwergencja cen w unii monetarnej jako czynnik sprzyjający neutralizacji szoków asymetrycznych
Price Convergence in a Monetary Union as a Factor Conducive to the Neutralisation of Asymmetric Shocks

Summary/Abstract: European Monetary Union experiences gradual convergence of nominal price levels. This paper provides a theoretical view on this process. We construct a simple, mathematical model which imitates the influence of price divergence on the balance of trade of EMU countries. With our simple model, illustrated with graphs, we obtain an intuitive insight into the process of price convergence, and how it influences a newmember country. Three cases are distinguished. As a benchmark, we use a small open economy. Then we consider a monetary union comprising a few identical countries. Finally, we analyse a realistic case where all countries are different. We claim that convergence of nominal prices allows for partial neutralization of asymmetric shocks.

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