Polasek, Wolfgang (Department of Economomics and Finance, Institute for Advanced Studies, Vienna) Amplatz, Christian (Free University of Bozen-Bolzano)
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We analyze the performance of the Maastricht convergence criteria (inflation, long-term interest rate, annual and overall public debt) of the European Monetary Union (EMU) that led to the introduction of the Euro on Jan. 1st 1999 as book currency. Defining 3 regimes, 1992-97, 1997-1999 and 2000-2001, we analyse convergence properties, like a smooth or a rough transition in the mean or variance shifts between these 3 regimes. Given the regimes, we test the convergence in econometric models to see if the first and second moments of the convergence process are time dependent. Furthermore we check for a smooth transition process between the regimes and if the convergence process has stabilized around a target path. We find that the speed of the convergence processes for the monetary authority controlled variables (inflation and interest rates) were very different from the government controlled variables annual deficit and the public debt.
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Paper provided by Institute for Advanced Studies in its series Economics Series with number
133.
Find related papers by JEL classification: C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
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