Price convergence toward the EU: A few open issues

This article attempts to answer a few open questions related to price conve rgence in the Czech Republic and in other Central and Eastern European Coun tries toward prices in the European Union. The authors address the followin g issues: First, what, from the theoretical viewpoint, should the quantitat ive relationship be between price level and GDP? Second, does the existing empirical data allow for a clear distinction between tradable and non-trada ble commodities, as assumed by standard theory? Third, what is the relation ship between price levels and coefficient measuring differences in the stru ctures of relative prices in individual countries? Fourth, what are the lik ely forms of relative price convergence in the Czech Republic toward access ion to the European Union? Fifth, what is the reason for the significantly negative residual of the Czech economy in the cross-country regressions of the average price level on GDP.