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Optimum filtering for optimum currency areas criteria

  • Itir Ozer


    (Hacettepe University, Department of International Relations)

  • Ibrahim Ozkan


    (Hacettepe University, Department of Economics)

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    This study aims to analyze Turkey and the Economic and Monetary Union (EMU) countries in the light of criteria suggested by the optimum currency areas (OCA) theory and to compare the criteria obtained by an application of Hodrick-Prescott (H-P) and Baxter-King (B-K) filters. To this end, we follow a novel technique, fuzzy c-means (FCM) clustering with upper and lower levels of fuzziness. The results show that the application of the H-P filtering technique with appropriate smoothing parameter values produces sensible clusters.

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    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 6 (2007)
    Issue (Month): 44 ()
    Pages: 1-18

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    Handle: RePEc:ebl:ecbull:eb-07f00058
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    1. Schlicht, Ekkehart, 2004. "Estimating the Smoothing Parameter in the So-Called Hodrick-Prescott Filter," IZA Discussion Papers 1054, Institute for the Study of Labor (IZA).
    2. Kozluk, Tomasz, 2005. "CEEC Accession Countries and the EMU - An Assessment of Relative and Readiness for Euro-Area Membership," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 20, pages 439-474.
    3. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1, December.
    4. Artis, M.J. & Zhang, W., 2002. "Membership of EMU: A Fuzzy Clustering Analysis of Alternative Criteria," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 17, pages 54-79.
    5. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
    6. Mongelli, Francesco Paolo, 2002. ""New" views on the optimum currency area theory: what is EMU telling us?," Working Paper Series 0138, European Central Bank.
    7. Christian J. Murray, 2003. "Cyclical Properties of Baxter-King Filtered Time Series," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 472-476, May.
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