ECONOMIC PERFORMANCE AND CONVERGENCE IN THE EUROZONE

This paper deals with determining the factors that impact the convergence of the Czech economy to the economy of Eurozone. Moreover, it attempts to determine the level of economic convergence in the EU using the beta-convergence and sigma-convergence techniques. The existence of this convergence is one of the necessary conditions for the creation of Monetary Union as stems from the Optimal Currency Area (OCA) theory. The paper employs the OCA theory as the key theoretical basis for empirical analysis and evaluates the cyclical and structural synchronization by the means of correlation coefficients of the GDP development, industrial production, inflation and interest rates. The results point out at the considerable level of convergence of the Czech economy (except the shock analysis), even though the values seem to be overvalued due to the recent economic and financial crisis.