Challenges for the Nominal Convergence in Poland in the Face of the Uniform Policy of the Eurozone
The main objective of this study is to present the theoretical aspects of the convergence process in the field of monetary affairs during the pre- and after-accession period and evaluation of the degree of convergence of the Polish with the euro area in the context of a single policy of the European...
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Інститут економіки промисловості НАН України
2015
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| Цитувати: | Challenges for the Nominal Convergence in Poland in the Face of the Uniform Policy of the Eurozone / P. Blashchyk, S. Zvershchlevsky // Економічний вісник Донбасу. — 2015. — № 4 (42). — С. 38-44. — Бібліогр.: 14 назв. — англ. |
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irk-123456789-1093162016-11-25T03:02:23Z Challenges for the Nominal Convergence in Poland in the Face of the Uniform Policy of the Eurozone Blashchyk, P. Zvershchlevsky, S. International and Regional Economics The main objective of this study is to present the theoretical aspects of the convergence process in the field of monetary affairs during the pre- and after-accession period and evaluation of the degree of convergence of the Polish with the euro area in the context of a single policy of the European Central Bank. The paper consists of two basic parts: the theoretical and the empirical. In the first were presented a reflection on variants of monetary policy during the pre-accession period to the euro area and the European monetary policy dilemmas. In the second part, against this background, contains an assessment of the Polish convergence with the euro area in the context of a single policy of the European Central Bank. Основна мета даного дослідження полягає в поданні теоретичних аспектів процесу конвергенції в області грошово-кредитної системи під час, до і після вступу Польщі до ЄС, а також оцінки ступеняпольської конвергенції по відношенню до Єврозони в контексті єдиної політики Європейського центрального банку. Робота складається з двох основних частин: теоретичної та емпіричної. У першій частині представлено аналіз варіантів грошово-кредитної політики протягом періоду підготовки приєднання до зони євро і європейських дилем грошово-кредитної політики. У другій частині, на підставі досліджень представлених в першій частині, міститься оцінка польської інтеграції з Єврозоною в контексті єдиної політики Європейського центрального банку. Основная цель данного исследования заключается в представлении теоретических аспектов процесса конвергенции в области денежно-кредитной системы во время, до и после вступления Польши в ЕС, а также оценки степени польской конвергенции по отношению к Еврозоне в контексте единой политики Европейского центрального банка. Работа состоит из двух основных частей: теоретической и эмпирической. В первой части представлен анализ вариантов денежно-кредитной политики в течение периода подготовки присоединения к зоне евро и европейских дилемм денежно-кредитной политики. Во второй части, на основании исследований представленных в первой части, содержится оценка польской интеграции с Еврозоной в контексте единой политики Европейского центрального банка. 2015 Article Challenges for the Nominal Convergence in Poland in the Face of the Uniform Policy of the Eurozone / P. Blashchyk, S. Zvershchlevsky // Економічний вісник Донбасу. — 2015. — № 4 (42). — С. 38-44. — Бібліогр.: 14 назв. — англ. 1817-3772 http://dspace.nbuv.gov.ua/handle/123456789/109316 336.74+336.77:339.923(438) en Економічний вісник Донбасу Інститут економіки промисловості НАН України |
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International and Regional Economics International and Regional Economics |
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International and Regional Economics International and Regional Economics Blashchyk, P. Zvershchlevsky, S. Challenges for the Nominal Convergence in Poland in the Face of the Uniform Policy of the Eurozone Економічний вісник Донбасу |
| description |
The main objective of this study is to present the theoretical aspects of the convergence process in the field of monetary affairs during the pre- and after-accession period and evaluation of the degree of convergence of the Polish with the euro area in the context of a single policy of the European Central Bank. The paper consists of two basic parts: the theoretical and the empirical. In the first were presented a reflection on variants of monetary policy during the pre-accession period to the euro area and the European monetary policy dilemmas. In the second part, against this background, contains an assessment of the Polish convergence with the euro area in the context of a single policy of the European Central Bank. |
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Blashchyk, P. Zvershchlevsky, S. |
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Blashchyk, P. Zvershchlevsky, S. |
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Blashchyk, P. |
| title |
Challenges for the Nominal Convergence in Poland in the Face of the Uniform Policy of the Eurozone |
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Challenges for the Nominal Convergence in Poland in the Face of the Uniform Policy of the Eurozone |
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Challenges for the Nominal Convergence in Poland in the Face of the Uniform Policy of the Eurozone |
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Challenges for the Nominal Convergence in Poland in the Face of the Uniform Policy of the Eurozone |
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Challenges for the Nominal Convergence in Poland in the Face of the Uniform Policy of the Eurozone |
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challenges for the nominal convergence in poland in the face of the uniform policy of the eurozone |
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Інститут економіки промисловості НАН України |
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2015 |
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International and Regional Economics |
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http://dspace.nbuv.gov.ua/handle/123456789/109316 |
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Challenges for the Nominal Convergence in Poland in the Face of the Uniform Policy of the Eurozone / P. Blashchyk, S. Zvershchlevsky // Економічний вісник Донбасу. — 2015. — № 4 (42). — С. 38-44. — Бібліогр.: 14 назв. — англ. |
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P. Blashchyk, S. Zvershchlevsky
38
Економічний вісник Донбасу № 4(42), 2015
UDC 336.74+336.77:339.923(438)
P. Blashchyk,
PhD (Economics),
PWSZ in Piła, Poland,
S. Zvershchlevsky,
PhD (Economics),
Poznań University of Economics, Poland
CHALLENGES FOR THE NOMINAL CONVERGENCE IN POLAND IN THE FACE
OF THE UNIFORM POLICY OF THE EUROZONE
1. Introduction
A common European Union currency has been in
retail use for slightly more than a decade now. Nonethe-
less, this short period of usage is enough to conduct var-
ious theoretical and empirical analyses of the single-cur-
rency area in Europe.
The theoretical aspect of the research on the Euro-
zone should also focus on the issues of quality of the
pre-accession policy. In this context, the manner of de-
termining the monetary and fiscal policy prior to access-
ing a monetary union becomes of considerable im-
portance. The level of convergence of fundamental pa-
rameters of these policies (in particular their interest
rates, inflation, budget deficit) constitutes a key factor
conditioning the efficacy of the process of monetary in-
tegration itself. Another problem is the possibility to di-
verge economic indexes in the countries which already
belong to the monetary union. A good example is as-
sessing the efficiency of monetary impulses generated
by a supranational central bank. Different features of
monetary policies of particular member states, espe-
cially those concerning the state of liquidity of the com-
mercial banking sector and the mechanism of financial
allocation, may distort the character of the mechanism
of monetary transmission, leading as a result to diver-
gence in the level of interest rates and/or inflation. A key
role in shaping the monetary sphere within the area in
question shall thus be attributed to the scope of reputa-
tion of the supranational central bank.
The above deliberation gives background to the
main aim of this work which is the presentation of the
theoretical aspects of the process of convergence in the
monetary sphere in the pre- and post-accession period as
well as the assessment of the level of Poland’s conver-
gence with the Eurozone in the context of the uniform
policy of the European Central Bank.
2. Variants of pre-accession monetary and fiscal
policy
The stability of the Eurozone is considered both
through the prism of the conditions which should appear
in the course of its functioning and the conditions for-
mulated in the pre-accession period. Of particular im-
portance in this period is the shape of the monetary pol-
icy which has an influence on two main parameters of
the monetary sphere, i.e. the inflation rate and the inter-
est rate. It is assumed that Poland’s accession to the Eu-
rozone will take place in a few years’ time, e.g. in the
period t + n, where t constitutes the present time (figure
1). It means that in order to fulfil the convergence crite-
ria in the monetary sphere (as well as the fiscal and for-
eign exchange spheres), adequate adaptations must take
place within n years. In this respect, we may specify two
extreme variants.
Fig. 1. Time periods on the way to the Eurozone
Source: the authors’ self-analysis.
Variant I would consist in fulfilling the monetary
criteria, especially inflation, even prior to joining ERM
II. Variant II would consist in not achieving monetary
borderline values before the exchange rate between the
Polish zloty and euro has been fixed. It is assumed that
not achieving the borderline values means a lack of any
adaptations in the monetary sphere [Błaszczyk,
Zwierzchlewski 2008].
The effects of the monetary authorities’ actions re-
quired to lower inflation in variant I could be less harm-
ful to the real sphere of the economy if they were spread
in time for the period (t, t + m). The National Bank of
Poland (NBP) could reduce the inflation by shaping in-
flation expectations properly, thus avoiding an exces-
sive growth in the interest rate. It has to be highlighted,
however, that strict requirements for fulfilling the infla-
Eurozone ERM II
t t + m + 1t + m t + n
P. Blashchyk, S. Zvershchlevsky
39
Економічний вісник Донбасу № 4(42), 2015
tion criterion may persist in the future. In such a case,
the monetary authorities will have to take more restric-
tive measures resulting in a slowdown in the real GDP
growth and its consequences for the employment
sphere. On the other hand, these hardships may be less
harmful since they are spread in time. It seems, however,
rather unlikely to attain the economic results making it
possible to join the Eurozone in a painless way, espe-
cially for such countries as Poland, where the unemploy-
ment rate is relatively high.
A positive consequence of realising variant I may
also be great stability of the Polish zloty in the European
trading band. It results from a smaller scale of adapta-
tions of monetary instruments in the period (t + m, t + n)
due to their active adaptation in the period (t, t + m).
Thus, the interchangeability between the inflation and
nominal appreciation would be split in time, making it
possible to reduce the inflation prior to joining ERM II
and to ensure a stable exchange rate of the Polish zloty
to the euro with a fluctuation band of ±15%. It shall be
highlighted that there exists a method in variant I in
which the exchange rate of the zloty may be changed.
This method consists in the possibility to negotiate the
level of the parity rate while joining ERM II. It results
from the fact that the central parity does not have to be
settled at the level which is equal to the current nominal
rate existing at the time of currency stabilisation. One
consequence of realising variant I would be a stronger
negotiation position of Poland following, first of all,
overestimation of the exchange rate of the zloty, differ-
ing considerably from the level of a long-term balance
rate resulting from earlier actions in the monetary and
fiscal spheres, and secondly, a negative influence of an
excessively strong currency on the unemployment rate
in Poland.
Variant II assumes failure to fulfil the convergence
criteria prior to bringing the zloty to ERM II. Conse-
quently, there will be a necessity to fulfil these criteria
in the first year of membership in the currency mecha-
nism (t + m, t + m + 1). This necessity results from the
divergence between a two-year reference period in the
currency rate sphere and a one-year reference period for
the other criteria. The application of variant II would en-
tail a severe fiscal and monetary restriction accumulated
in time. An unquestionable effect of such actions would
be a shock in the real sphere of the economy. Possible
economic actions within the variant under discussion
would also entail some destabilising effects for the ex-
change rate of the zloty in ERM II. The scale of desta-
bilisation would depend on how severe the Balassa-
Samuelson effect would turn out to be and on the scale
of the speculative capital flow. With a large strength of
both of the criteria, simultaneous reduction in the infla-
tion and control of the currency exchange rate (within
the band of ±15%) would be very difficult to reconcile.
It seems, however, that practical realisation of variant II
1 A monetary order in more general terms also refers to the type of monetary signs and principles of financial settlements
used in a given country [Narolewska 2001; Jurek, Knakiewicz, Marszałek 2011].
is rather unlikely to happen, especially in the face of a
large internal imbalance in the Polish economy.
3. Selected problems of uniform monetary pol-
icy in the Eurozone
Stability of the Eurozone requires convergent mon-
etary order with convergent inflation and interest rates.
The monetary order specifies the bases for the function-
ing of a central bank, including above all the available
instruments, priorities in conducting the monetary pol-
icy and its institutional framework1. This creates funda-
mental elements of the order in question in the form of
the level of the interest rate, the level of the inflation and
the manner in which these variables are determined in-
cluding the scope of political independence and eco-
nomic responsibility of the central bank.
Divergence of the monetary sphere components
may lead to the occurrence of negative economic phe-
nomena threatening the stability of the single-currency
area. For instance, in countries with lower inflation com-
mon monetary policy would become overly restrictive
(due to a high real rate), having a negative effect on the
level of employment and the domestic product, whereas
in the countries where inflation is higher it would be too
expansive (due to a low real rate), which would be con-
ducive to a further increase – rather than decrease – in
inflation. Thus, on the one hand the situation on the la-
bour market would worsen, yet on the other hand, infla-
tion tendencies, including inflation expectations, would
strengthen [Błaszczyk 2010, p. 56]. Assuming a uniform
inflation rate, divergent values of the market interest
rates would divide the level of real rates, which would
curb economic development or hinder maintaining the
same level of inflation in the Eurozone member states.
In economic reality there may, however, occur dif-
ferentiation of the levels of inflation and interest rates in
particular member states of the Eurozone despite the fact
that the monetary instruments which influence the val-
ues of the above variables are specified in a centralised
system. A factor which influences the (different) level
of interest rates is the character of the mechanism for
transmitting the monetary policy. Of particular im-
portance here is the aspect of an external delay of this
policy. In most general terms, it may be described as the
time that the economy needs to adapt itself to new con-
ditions created by the change in the economic instru-
ments [Kowalski 2001, p. 81]. The character of the de-
lay in question is determined by the institutional frame-
work specified in a given country within the scope of
commercial banks, including the character of relations
between these banks and a central bank and between pri-
vate banks and the real economy. This character may
differentiate the monetary sphere in member states,
since it was previously (prior to accession) determined
by individual practice of relations between national cen-
tral banks and the sector of financial mediation as well
as between this sector and households and enterprises.
P. Blashchyk, S. Zvershchlevsky
40
Економічний вісник Донбасу № 4(42), 2015
If the relations between these links were different in re-
ality, it would be difficult to make them uniform after
the accession to the Eurozone of particular states, at least
in a short-term perspective [Dornbusch, Favero,
Giavazzi 1998]. That is why different levels of the li-
quidity of banking sectors or different characters of the
mechanism of financial allocation1 in these countries
may create divergent reactions of private banks to the
transmission of monetary impulses from a common cen-
tral bank and the real sphere of the economy to the
changes in the market rates in the banking sector.
Specifying the types of inflation constitutes the ba-
sis for establishing the causes of the possible differenti-
ation of its levels in the Eurozone. For example, an in-
terest rate is an important determinant of demand, since
it creates the size of a bank loan. That is why the above-
mentioned factors which differentiate the level of inter-
est rates have an influence also on the levels of inflation
in particular member states. What has to be taken into
account at this point is a growing influence of the so-
called credit intermediaries which are usually not sub-
ject to supervision by the monetary authorities. These
entities may increase the credit expansion in the periods
of restrictive monetary policy, and thus distort the trans-
mission of the policy of a common central bank [Du-
wendag et al. 1996, p. 160]. This problem becomes even
larger (due to the differences in the levels of inflation)
when there is uneven concentration of these entities
among the monetary union member states.
With the existence of the factors which may distort
the monetary order in the Eurozone, of particular im-
portance becomes the issue of the reputation of a supra-
national central bank, and thus the quality of the com-
mon monetary policy. The main problem is the fact that
the credibility of a central bank cannot be built over-
night. However, this process may be efficiently short-
ened by applying adequate institutional solutions with
respect to central banking in the Eurozone. The compo-
nents of these solutions are the following:
building a common central bank in accordance
with a specific adopted model,
specifying an explicite goal (or goals) of the com-
mon monetary policy,
granting the bank in question complete political
and functional independence and minimising its formal
responsibility for realising its own goals,
determining an explicite manner of specifying an
interest rate and exchange regulations.
Assuming in advance a certain point of reference
for the form of a common bank may cause the economic
and private entities to accept and place confidence in the
new monetary authorities without much hesitation. A
necessary condition for this is relatively early infor-
mation concerning the assumed model and its prestige.
That is why a commonly accepted central bank must
1 The condition of the liquidity of the banking sector is one of the factors which influence the time and strength of reactions
of commercial banks to a change in the values of the instruments of a central bank, whereas the mechanism of financial allocation
determines to a large extent the time and strength of reactions of enterprises to a change in market interest rates.
serve as a point of reference. The determinants of the
bank’s good reputation should be the following: high ef-
ficiency in realising goals and clear rules of communi-
cation with the environment. It also seems favourable to
choose such a bank model from the group of states
which make up the monetary union.
Economic benefits coming from low inflation and
the necessity to maintain the inflation at a similar level
among the Eurozone member states should be a final de-
terminant for selecting a superior goal of the common
monetary policy of the union in the form of a stable price
level. Assuming a principle that the goal of this policy
will be to attain more than one aim, e.g. low inflation,
high employment rate or high financial stability within
the monetary union, forces economic and private enti-
ties to settle which aim shall become more important (in
the short- and long-term periods). This may result in
considerable decline in confidence to a common central
bank from the viewpoint of price stability and distort the
monetary order in the union.
The conditions in which the monetary authorities
are created in the Eurozone should also serve as a deter-
minant for granting a full scope of political and func-
tional independence to these authorities. The manners of
functioning of the authorities in question may be deter-
mined in the course of international arrangements or in
the course of such arrangements together with the aid of
an independent organ of the union consisting of a group
of experts [De Cecco, Giovannini, CUP, Cambridge
1989], above all in the area of central banking. It is dif-
ficult to determine the entity on which a common central
bank would be (more or less) politically dependent and
obliged to account for the effects of its actions. Such an
entity could not definitely be any of the national param-
eters due to the negative political connotations of choos-
ing such a solution. Any scope of dependence on and
responsibility to an organ of the union would require
granting it broad prerogatives in order to exercise power
within the area of the Eurozone. In reality, this would
entail the presence of a political and currency union
characterised both by complete integration of the mone-
tary sphere and the existence of the supranational legis-
lative and executive authorities. Such a high level of po-
liticising is, however, a feature of higher forms of inte-
gration with reference to the monetary union. Similar
reasons justify equipping a common central bank with
unlimited competences concerning the establishment of
the levels of interest rates and other instruments of the
monetary policy. A logical reason for granting full func-
tional independence is also the structure of goals of the
common monetary policy, including above all the reali-
sation of the superior goal [Bofinger 2001].
Specifying by a common central bank a uniform
range of monetary instruments for all member states of
the union creates a problem of choosing its most optimal
P. Blashchyk, S. Zvershchlevsky
41
Економічний вісник Донбасу № 4(42), 2015
shape. Of particular importance is the choice of the best
possible interest rate in the case when there occur diffe-
rences in the levels of inflation in particular Eurozone
member states. The credibility of the bank in question
will depend on how precisely it will be able to explain
to the society the method of selecting the level of the
interest rate. In order to strengthen this credibility, the
interest rate level should be placed in the middle of the
interest rate range desired by particular states. Most
states would then be eager to accept the current level of
the interest rate in relation to the inflation rate. In this
context an important element of constructing the institu-
tional framework for a common central bank is its or-
ganisational structure, and especially the shape of the
process of implementing decisions. An optimal solution
would be a centralised structure which would accumu-
late this process in the hands of one decision-making
group that would be autonomic in relations to particular
member states of the union. In a centralised system it is
much easier to determine a certain value of the interest
rate with a different arrangement of inflation levels
within the Eurozone area. It shall be assumed, however,
that the national monetary authorities will want to obtain
a considerable influence on the policy of the common
central bank. If the decision-making process is decen-
tralised in this bank and national interests begin to dom-
inate the interests of the entire system, it will be quite
difficult to reach a consensus concerning the level of the
interest rate with a symmetrical and asymmetrical ar-
rangement of the inflation rate.
The main determinant of currency relations in a
monetary union is a lack of the possibility to correct the
nominal currency rate. A rational assumption may be
made at the same time that the international exchange
between particular member states constitutes the main
part of their foreign trade. In such a situation, develop-
ing competitiveness of each of the economies in the un-
ion requires reducing the costs of production, and con-
sequently reducing the inflation rate. It should result in
a growth in competitiveness of the entire integration
group in relation to third countries and constitute at the
same time an important factor increasing confidence in
the common currency. Furthermore, this is also a reason
for focusing on stabilising the financial sphere within
the monetary union, and not on maintaining a stable rate
of the common currency in relation to a selected refer-
ence currency.
4. Assessment of nominal convergence in Poland
in the face of the Maastricht convergence criteria
The main threat of and fear for joining the Euro-
zone is the loss of the autonomic, national monetary
policy and the possibility of a discretional influence of
this instrument on the economy. In order to neutralise
this negative aspect of accession, it is necessary to ade-
quately conduct convergence, both nominal and real, as
well as monetary, fiscal and foreign exchange. It may
cause a uniform policy of the European Central Bank
(ECB), both in the sphere of goals (with price stability
being a superior goal) and instruments (the main instru-
ment being a short-term interest rate) to be adequate for
Poland and to be conducive to the economic growth. In
such a case, it seems beneficial to conduct regular as-
sessment of convergence, including the nominal conver-
gence, with the Eurozone.
The assessment in this work concerns the Maas-
tricht criteria of the nominal convergence. These criteria
should be viewed not only from the prism of the neces-
sity of their fulfilment in order to join the Eurozone
(possibly in a quick and unstable manner), but also as
the areas where the convergence with the monetary un-
ion shall ensure benefits to the member states. Of the
main interest is the criterion concerning the general
price level dynamics, since it is the value (and more pre-
cisely price stability) which determines a strategic and
superior goal not only of the ECB but also the majority
of central banks around the world, including the NBP.
The other convergence criteria may be viewed from the
prism of the conditions of the monetary policy which in-
fluence the price dynamics. Thus, their convergence has
an influence on the efficacy of this policy.
On the one hand, fiscal parameters (the deficit and
the public finance sector debt) are positively correlated
with the price dynamics. For instance, overly expansive
fiscal policy, much as it causes an increase in the param-
eters, influences in the same direction the inflation and
distorts its stability. An unstable currency rate also dis-
torts the price stability. In this case, the interrelations are
also positive – a growth in the rate (assuming it is depre-
ciation – direct quotation) stimulates the inflation. Re-
versed relations occur, on the other hand, in the case of
the interest rate influencing the price dynamics. The
above-presented relations indicate the necessity to coor-
dinate various areas of the economic policy (monetary,
fiscal and if need be – treating it separately – foreign
exchange). Only this policy can ensure long-lasting ful-
filment of the Maastricht criteria and increase in the
long-term the benefits of joining the area of a common
European currency. The results of this part of the re-
search will indicate among all, firstly, which of the cri-
teria constitute the main barrier for Poland’s accession
to the Eurozone, and secondly, in which years Poland
was “closest” to the Eurozone.
In order to conduct the assessment of convergence
in such a depiction, a few assumptions have been made.
First of all, the examination encompasses the period be-
tween 2004 and 2014. The initial turning point is Po-
land’s accession to the EU, which gives the possibility
to apply for joining the Eurozone, whereas the final
point is determined by the availability of the data, espe-
cially bearing in mind next assumptions. Secondly, the
assessment encompasses five convergence criteria laid
down in the Treaty of Maastricht. Thirdly, the assess-
ment is conducted at the end of particular years.
Fourthly, the assessment uses the Eurostat data taken
from its webpage in September 2015. Next, the authors
have made an assumption concerning convergence with
respect to price stability that the states which are char-
acterised by the negative general price level dynamics
P. Blashchyk, S. Zvershchlevsky
42
Економічний вісник Донбасу № 4(42), 2015
cannot play reference roles 1. Finally, the examination
omits the assessment concerning the foreign exchange
criterion.
The assessment of Poland’s convergence in this
area seems difficult due to a lack of specified central
parity for the ERM II system. It shall be highlighted,
however, that the exchange rate is a macroeconomic
value which cannot be controlled precisely, especially
under the conditions of the independent floating system.
The changes in the system are influenced also by the
factors which do not depend on the national economic
authorities and which are frequently unpredictable, e.g.
a financial and economic crisis. Additionally, is shall be
emphasised that currency tensions may occur in the fu-
ture as a result of the activities within the economic pol-
icy aiming at fulfilling the other Maastricht criteria. In
particular, a strong connection with the general price
level dynamics through the main factor shaping both
values, i.e. the interest rate, should be noticed. With the
above circumstances, the criterion in question should
not be underestimated by the economic authorities.
Comprehensive results of the assessment in the remain-
ing four areas are presented in figure 2 and in table 1.
Deficit Debt
Inflation Interest rates
Fig. 2. Nominal convergence criteria in Poland in the period 2004-2014
Source: prepared by the authors on the basis of the Eurostat data.
Analysing the table horizontally, one may con-
clude that the worst assessment goes to the criterion of
the public finance sector deficit. In fact, it constitutes the
greatest barrier for Poland’s accession to the Eurozone.
The borderline value was not exceeded only in 2007.
From that year on, the deficit in relation to the GDP had
grown over the next three years and exceeded consider-
ably the allowable 3% (in the years 2009 and 2010 the
index in question amounted to 7.3% and 7.9% respec-
tively). Only in the year 2011 was there a decline in the
relation under analysis to 5%, and in the years 2012-
2014 a decline to the value between 3 and 4%. Fulfilling
the reference criterion in this respect will be extremely
difficult in the following years and will require strict
policy from the fiscal authorities, especially in the face
of post-election political disturbances which took place
at the end of 2015. It seems to be the main challenge for
Poland on its way to the Eurozone.
1 It shall be noted that in 2004 the European Commission decided to eliminate Lithuania from the reference states in their
reports on convergence, since this country was then characterised by negative HICP dynamics. Yet in 2010, when a few EU
member states were undergoing deflation (Ireland, Portugal, Estonia, Belgium, Spain), the European Commission decided ar-
bitrarily to eliminate only Ireland from the reference states, since it had the greatest deflation rate.
0
1
2
3
4
5
6
7
8
9
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
(%)
0
10
20
30
40
50
60
70
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
(%)
0
1
2
3
4
5
20142013201220112010200920082007200620052004
(%)
Criterion Inflation in Poland
2
4
6
8
10
12
14
20142013201220112010200920082007200620052004
(%)
Criterion Interest rates in Poland
P. Blashchyk, S. Zvershchlevsky
43
Економічний вісник Донбасу № 4(42), 2015
Table 1
Nominal convergence criteria in Poland in the period 2004-2014 - summary
Year
Criterion 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Debt + + + + + + + + + + +
Deficit - - - + - - - - - - -
Inflation - + + + - - - - - + +
Interest rates - + + + + - - + + + +
Remark: the sign “+” in a particular cell means that a given criterion would be fulfilled in a given year, whereas the
sing “–” means failure to fulfil the criterion.
Source: prepared by the authors on the basis of the Eurostat data.
Furthermore, it is worth highlighting that despite
positive assessment of the second (fiscal) criterion con-
cerning the relation of the public debt to the GDP, it has
been characterised by an ascending tendency since
2007. In 2011 it amounted to 56.4%, and in 2012 to
55.6%, i.e. the highest value in 15 years, which – ac-
cording to the act on public finance – requires adequate
precautionary and reformatory procedures to be applied
[Act of 27 August 2009 on public finance, Article 86,
87]. In the following years its value stabilised, and even
decreased a little. However, if there appears a growing
tendency in the next few years as far as this index is con-
cerned, e.g. in the face of after-election irrational fiscal
policy, and especially a lack of reforms within public
finance, there may occur problems with fulfilling the
reference value in this area in the future. Additionally,
such a direction of budget policy may be a long-lasting
stimulus increasing the price dynamics, and conse-
quently posing a threat to the common uniform mone-
tary policy.
Crucial problems may also concern price stability
itself, which generally is an effect of the relative charac-
ter of this criterion [Błaszczyk, Zwierzchlewski 2005,
pp. 17–18]. What follows from the assessment is that
only in the years 2005-2007 would Poland fulfil the bor-
derline values in this area. Bearing in mind quite a low
value of this criterion (especially in 2009) on the one
hand, and the fact that Poland – being a developing
country – must accept slightly higher price dynamics on
the other hand, it may be concluded that fulfilling the
criterion in question (in the period prior to and following
the accession to the Eurozone) may be troublesome.
First of all, it will depend on external factors (which do
not have a source in an interested country) such as price
dynamics in reference countries as well as an arbitrary
decision of the EC concerning the manner of estimating
the borderline values (in the case of deflation). Sec-
ondly, fulfilling a low inflation criterion may require re-
strictive economic policy (mainly monetary), which
may lead to negative consequences for the real sphere of
the economy and higher costs of accession. The inflation
criterion was either fulfilled or not fulfilled on alternate
years. Similar remarks may be made with reference to
the criterion concerning the interest rates.
Analysing figure 2 and table 1 vertically, we may
conclude that the highest level of nominal convergence
was achieved by Poland in 2007, when all criteria (ex-
cept for the exchange rate which was not taken into con-
sideration here) would be fulfilled. In the remaining
years the criteria would not be fulfilled completely,
which depicts the degree of convergence of the Polish
economy with the Eurozone in a negative way. In the
last two years there was certain noticeable progress. The
only criterion which was not fulfilled was the budget
deficit criterion, while the “distance” to its fulfilment
was shortened by the economic authorities. It shall be
highlighted that the process of convergence has a long-
term character and only its durability may lead to the
adaptation to common and uniform monetary policy,
and thus bring the essential benefits of joining the mon-
etary union. A reflection of this durability is the criterion
of the long-term interest rate, which – interestingly – ap-
pears rather positive for Poland compared to the other
criteria. These conclusions should, however, be treated
with some caution due to the arbitrary assumptions
made in the assessment as well as for the fact that Poland
does not officially make any attempts to fulfil the crite-
ria, and especially for the fact that it has not joined ERM
II yet.
5. Conclusions
The examination conducted in this work indicate
explicitly that the convergence of Poland with the Euro-
zone is low in the context of joining common and uni-
form monetary policy. The economy of Poland fails to
fulfil the criteria conditioning the accession to the Euro-
pean monetary union, and it seems unlikely to change
due to the fact that Poland lacks broadly understood con-
vergence. There are some serious arguments indicating
that the uniform policy of the ECB could not be adapted
to Poland’s economic conditions both in the nominal
sphere as well as the real, monetary and fiscal spheres.
In the light of the above conclusions, Poland’s ac-
cession to the Eurozone should be planned and con-
ducted in a proper way, including an adequate time hori-
zon and the character of social and economic conditions.
It should match the process of broadly understood long-
term convergence of the developing Polish economy.
Only such a manner of accession may guarantee an ac-
tive balance of benefits and costs of joining the Euro-
zone. The date of accessing the Eurozone should, first
of all, be a secondary issue depending on the entire pro-
cess of convergence, and secondly, it should be finally
determined for the most favourable period in terms of
the local and global financial and economic conditions.
It should not certainly take place in the time of a crisis.
P. Blashchyk, S. Zvershchlevsky
44
Економічний вісник Донбасу № 4(42), 2015
As has been shown in this work, the convergence of the
Polish economy with the Eurozone in such circum-
stances was exceptionally low, especially in terms of the
general price level dynamics. Additionally, what should
also be taken into consideration is the uncertainty asso-
ciated with the after-election transitional period. Its pos-
sibilities to stabilise will determine the perspectives for
the nominal convergence in Poland and its accession to
the Eurozone.
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Блашчик П., Звєжхлевський С. Проблеми
номінальної конвергенції в Польщі в контексті
єдиної політики Єврозони
Основна мета даного дослідження полягає в по-
данні теоретичних аспектів процесу конвергенції в
області грошово-кредитної системи під час, до і пі-
сля вступу Польщі до ЄС, а також оцінки ступеня
польської конвергенції по відношенню до Єврозони
в контексті єдиної політики Європейського центра-
льного банку. Робота складається з двох основних
частин: теоретичної та емпіричної. У першій частині
представлено аналіз варіантів грошово-кредитної
політики протягом періоду підготовки приєднання
до зони євро і європейських дилем грошово-кредит-
ної політики. У другій частині, на підставі дослі-
джень представлених в першій частині, міститься
оцінка польської інтеграції з Єврозоною в контексті
єдиної політики Європейського центрального бан-
ку.
Ключові слова: номінальна конвергенція в
Польщі, єдина політика, Єврозона.
Блашчик П., Звежхлевский С. Проблемы но-
минальной конвергенции в Польше в контексте
единой политики Еврозоны
Основная цель данного исследования заключа-
ется в представлении теоретических аспектов про-
цесса конвергенции в области денежно-кредитной
системы во время, до и после вступления Польши в
ЕС, а также оценки степени польской конвергенции
по отношению к Еврозоне в контексте единой поли-
тики Европейского центрального банка. Работа со-
стоит из двух основных частей: теоретической и эм-
пирической. В первой части представлен анализ ва-
риантов денежно-кредитной политики в течение пе-
риода подготовки присоединения к зоне евро и ев-
ропейских дилемм денежно-кредитной политики.
Во второй части, на основании исследований пред-
ставленных в первой части, содержится оценка
польской интеграции с Еврозоной в контексте еди-
ной политики Европейского центрального банка.
Ключевые слова: номинальная конвергенция в
Польше, единая политика, Еврозона.
Blashchyk P., Zvershchlevsky S. Challenges for
the Nominal Convergence in Poland in the Face of
the Uniform Policy of the Eurozone
The main objective of this study is to present the
theoretical aspects of the convergence process in the
field of monetary affairs during the pre- and after-acces-
sion period and evaluation of the degree of convergence
of the Polish with the euro area in the context of a single
policy of the European Central Bank. The paper consists
of two basic parts: the theoretical and the empirical. In
the first were presented a reflection on variants of mon-
etary policy during the pre-accession period to the euro
area and the European monetary policy dilemmas. In the
second part, against this background, contains an assess-
ment of the Polish convergence with the euro area in the
context of a single policy of the European Central Bank.
Keywords: nominal convergence in Poland, uni-
form policy, Eurozone.
Received by the editors: 29.10.2015
and final form 28.12.2015
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