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Convergence Across EU countries: Inflation and Savings Rates on Physical and Human Capital
Paulo Soares Esteves
The concepts of absolute and relative convergence are tested for the twelve EU countries. The model used is the one presented in Mankiw, Romer and Weil (1992), which is an extension of the classical Solow-Swan’s model including human capital. Additionally, as in Fischer (1993), it is assumed that inflation affects productivity. A panel data is used for the period 1961-1990: (i) the absolute convergence hypothesis is not consistent with the model; (ii) the saving on physical and human capital and the inflation levels are identified as explaining variables of permanent differences between per capita GDP of EU countries.