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The Maastricht Inflation Criterion

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  • Ales Bulir
  • Jaromír Hurník

Abstract

The Maastricht inflation criterion, designed in the early 1990s to bring "high-inflation" EU countries in line with "low-inflation" countries prior to the introduction of the euro, poses challenges for both new EU member countries and the European Central Bank. While the criterion has positively influenced the public stance toward low inflation, it has biased the choice of the disinflation strategy toward short-run, fiat measures-rather than adopting structural reforms with longer-term benefits-with unpleasant consequences for the efficiency of the eurozone transmission mechanism. The criterion is also unnecessarily tight for new member countries as it mainly reflects cyclical developments.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/154.

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Length: 43
Date of creation: 01 Jun 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/154

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Keywords: European Union; Labor mobility; Prices; inflation; monetary policy; central bank; monetary fund; national bank; low inflation; monetary transmission; aggregate demand; inflation rates; rate of inflation; nominal interest rate; inflation rate; price level; monetary transmission mechanism; average inflation; price stability; inflation convergence; real interest rate; monetary union; annual inflation; monetary authority; inflation targeting; monetary institutions; inflation target; monetary policy transmission mechanism; high inflation; monetary system; monetary economics; price competitiveness; average inflation rate; nominal interest rates; monetary independence; rise in inflation; price inflation; monetary policies; monetary transmission mechanisms; average rate of inflation; real exchange rates; stable prices; monetary policy rules; increase in inflation; inflation performance; relative price; national monetary policy; real output; annual inflation rate; european monetary system; international monetary arrangements; inflation dynamics; monetary authorities; optimal monetary policy; monetary systems; monetary stability; monetary arrangements; rates of inflation; average price level; forecasting inflation; european monetary union;

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References

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Citations

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Cited by:
  1. Martin Cihák & Wim Fonteyne, 2009. "Five Years After," IMF Working Papers 09/68, International Monetary Fund.
  2. Alena Bicakova & Kamil Dybczak & Ales Krejdl & Jiri Slacalek & Michal Slavik, 2007. "CNB Economic Research Bulletin: Fiscal Policy and its Sustainability," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 2, volume 5, number rb05/2 edited by Ian Babetskii & Vladimir Bezdek, August.
  3. Ian Babetskii & Ales Bulir & Fabrizio Coricelli & Jan Filacek & Michal Franta & Roman Horvath & Branislav Saxa & Katerina Smidkova, 2008. "CNB Economic Research Bulletin: Ten Years of Inflation Targeting," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 1, volume 6, number rb06/1 edited by Ian Babetskii & Katerina Smidkova, August.
  4. Ales Bulir & Katerina Smídková, 2008. "Striving to Be "Clearly Open" and "Crystal Clear"," IMF Working Papers 08/84, International Monetary Fund.
  5. Ashoka Mody & Franziska Ohnsorge, 2007. "Can Domestic Policies Influence Inflation?," IMF Working Papers 07/257, International Monetary Fund.
  6. Kateøina Šmídková & Aleš Bulíø, 2007. "Striving to Be “Clearly Open” and “Crystal Clear”: Monetary Policy Communication of the CNB," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(11-12), pages 540-557, December.
  7. Juraj Antal & Jan Filáček & Jan Frait & Roman Horvath & Viktor Kotlán & Michal Skořepa, 2009. "Monetary Policy Strategies before Euro Adoption: The Art of Chasing Many Rabbits," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(2), pages 176-198, July.
  8. Jan Babeck� & Aleš Bulíř & Kateřina šmídková, 2009. "Sustainable real exchange rates in the new EU Member States: Is FDI a mixed blessing?," European Economy - Economic Papers 368, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  9. Vlastimir Vukovic & Aleksandar Zdravkovic, 2011. "The Inflation and Exchange Rate in the Five Balkan Countries from Maastricht Convergence Criteria Prospect," Book Chapters, Institute of Economic Sciences.
  10. Juraj Antal & Zuzana Antonicova & Michal Hlavacek & Tomas Holub & Roman Horvath & Jaromir Hurnik & Ondrej Kamenik & Karel Musil & Lubos Ruzicka & Jal Vlcek, 2009. "CNB Economic Research Bulletin: Evaluation of the Fulfilment of the CNB's Inflation Targets 1998-2007," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 1, volume 7, number rb07/1 edited by Jan Babecky & Katerina Smidkova, August.

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