REAL CONVERGENCE IN EU: IS THERE A DIFFERENCE BETWEEN THE EFFECTS OF THE PANDEMIC AND THE GLOBAL ECONOMIC CRISIS?

Abstract

This paper aims to shed some light on the real convergence process among EU economies in the context of the COVID-19 pandemic crisis in comparison to the real convergence in 2008, when the last financial crisis erupted. According to entropy method results, the most pronounced difference between effects of the current pandemic and the global financial crisis are registered in the unemployment rate, while the difference in the current account balance and GDP per capita are much less noticeable. The results of the entropy method also suggest that the greatest difference among EU economies in 2020 is registered in the current account deficits; a slightly lower difference is registered in the unemployment rate, while the divergence in GDP is much less pronounced. To explain the results of the entropy method, a hierarchical cluster analysis is performed and three clusters are derived. Based on the identified characteristics of the derived clusters, some policy recommendations for overcoming the current crisis are defined.