Journals Proceedings

Abstract

A monetary union accession is preconditioned by sufficient real convergence of an acceding country to existing member countries of such monetary union. By default, the price level convergence criterion is described as a deviation of an acceding country’s price level from the average price level of the euro area. The Czech price level is lower by 31.3% (2013). We believe this formulation of price convergence is not suitable. Weighted deviation of the Czech price level from the price levels of its main business partners is more cogent. According to the aforementioned new indicator, the Czech price level is only down by 24.5%. The paper also examines the correlation between the actual inflation and the perceived inflation in the euro area and in the Czech Republic, coming to a conclusion about expected significant increase in the perceived inflation after the euro introduction.