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We examine economic convergence among euro area countries on multiple dimensions. While there was nominal convergence of inflation and interest rates, real convergence of per capita income levels has not occurred among the original euro area members since the advent of the common currency. Income convergence stagnated in the early years of the common currency and has reversed in the wake of the global economic crisis. New euro area members, in contrast, have seen real income convergence. Business cycles became more synchronized, but the amplitude of those cycles diverged. Financial cycles showed a similar pattern: sychronizing more over time, but with divergent amplitudes. Income convergence requires reforms boosting productivity growth in lagging countries, while cyclical and financial convergence can be enhanced by measures to improve national and euro area fiscal policies, together with steps to deepen the single market.

Exports and Imports --- Inflation --- Macroeconomics --- Business Fluctuations --- Cycles --- Economic Integration --- Financial Aspects of Economic Integration --- Measurement of Economic Growth --- Aggregate Productivity --- Cross-Country Output Convergence --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Personal Income, Wealth, and Their Distributions --- Price Level --- Deflation --- Economic growth --- International economics --- Business cycles --- Personal income --- Financial cycles --- Monetary unions --- National accounts --- Financial sector policy and analysis --- Prices --- Economic integration --- Income --- Germany

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Investment across the euro area remains below its pre-crisis level. Its performance has been weaker than in most previous recessions and financial crises. This paper shows that a part of this weakness can be explained by output dynamics, particularly before the European sovereign debt crisis. The rest is explained by a high cost of capital, financial constraints, corporate leverage, and uncertainty. There is a considerable cross country heterogeneity in terms of both investment dymanics and its determinants. Based on the findings of this paper, investment is expected to pick up as the recovery strengthens and uncertainty declines, but persistent financial fragmentation and high corporate leverage in some countries will likely continue to weigh on investment.

Investments --- Investing --- Investment management --- Portfolio --- Finance --- Disinvestment --- Loans --- Saving and investment --- Speculation --- Banks and Banking --- Financial Risk Management --- Investments: Stocks --- Money and Monetary Policy --- Economic Theory --- Investment --- Capital --- Intangible Capital --- Capacity --- Money Supply --- Credit --- Money Multipliers --- Financial Crises --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian) --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Interest Rates: Determination, Term Structure, and Effects --- Economic & financial crises & disasters --- Investment & securities --- Economic theory & philosophy --- Monetary economics --- Financial crises --- Stocks --- Neoclassical theory --- Currencies --- Yield curve --- Financial institutions --- Economic theory --- Money --- Financial services --- Neoclassical school of economics --- Interest rates --- Spain