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The Maastricht convergence criteria and optimal monetary policy for the EMU accession countries

The Maastricht convergence criteria and optimal monetary policy for the EMU accession countries

In order to implement the already adjusted criteria into the linear quadratic framework, we take advantage of the method proposed by Rotemberg and Woodford (1997, 1999) and Woodford (2003) which is applied to the zero bound constraint for the nominal interest rate. The authors propose to approximate the zero bound constraint for the nominal interest rate by restricting the mean of the nominal interest rate to be at least k standard deviations higher than the theoretical lower bound, where k is a su¢ciently large number to prevent frequent violation of the original constraint. The main advantage of this alternative constraint over the original one is that it is much less computationally demanding and it only requires computation of the …rst and second moments of the nominal interest rate, while the original one would require checking whether the nominal interest rate is negative in any state which, in turn, depends on the distribution of the underlying shocks.
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Latvian accession to the EMU during the European debt crisis: an attempt to evaluate the convergence attained according to the Convergence Criteria

Latvian accession to the EMU during the European debt crisis: an attempt to evaluate the convergence attained according to the Convergence Criteria

In 1969 at The Hague, national heads of states and governments of the ECs authorized a working group under the chairmanship of Pierre Werner, who was at that time the Prime Minister of Luxembourg, to explore the potential of monetary co-operation (Bache, George, and Bulmer 2011, p.137). The request for a monetary integration resulted mainly from the USA‟s actions financing the Vietnam War through expansive monetary policy and public debts (Pfister and Fertig 2004). Within the on-going Bretton Woods system some participating states were not willing to accept this kind of US inflationary policy. The European response was a blueprint for a monetary and economic union which could have been achieved in three steps by 1980 (Bache, George, and Bulmer 2011, p.137). However, the report included proposals - like a political union as the last consequence - that were too ambitious for the ECs which were determined by intergovernmental co-operation. Only the first step of the blueprint, a narrowing of exchange rates, was aspired. Facing the failure of the Bretton Woods system in 1971 the MS agreed on the so called „snake in the tunnel‟. This metaphor illustrated a “mechanism for managing fluctuations of their currencies (the snake) inside narrow limits against the dollar (the tunnel)” (European Commission 2010b). After the collapse of this exchange rate agreement, which occurred due to events like the oil-crisis and the dollar weakness as well as the persistence of MS to preserve their Keynesian national economic policies, the next overall attempt to adjust exchange rates resulted in the European Monetary System (EMS) in 1979 (Bache, George, and Bulmer 2011, p.143). Within the EMS the national exchange rates could fluctuate around the European Currency Unit (ECU) consisting of weighted participating currencies (ibid.). The Exchange Rate Mechanism (ERM) observed if the currency fluctuations were “kept within ±2.25% of the central rates” (European Commission 2010b). Until 1983, the central rate had to adopt seven times with 21 appreciations and depreciations emphasising the missing consensus of monetary discipline between the participants (Abelshauser 2010, p.42).
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The Maastricht Convergence Criteria and Monetary Regimes for the EMU Accession Countries

The Maastricht Convergence Criteria and Monetary Regimes for the EMU Accession Countries

Since all the EMU accession countries are characterized by a high productivity growth (especially in the tradable sector) many researchers test the hypothesis of the Balassa - Samuelson e¤ect for these countries. According to the Balassa -Samuelson e¤ect (Balassa (1964)) a country which experiences a higher productivity growth in the traded sector will face higher consumer prices and subsequently real exchange rate appreciation. An existence of the strong Balassa - Samuelson e¤ect could endanger the attempts of keeping low in‡ation di¤erential between these countries and the euro area. We can list the following empirical studies analyzing the Balassa-Samuelson e¤ect in the EMU accession countries: Cipriani (2001), de Broeck and Slok (2001), Egert et al. (2002), Fisher (2002), Halpern and Wyplosz (2001), Coricelli and Jazbec (2001), Arratibel et al. (2002) and Mihaljek and Klau (2004). The main …ndings of these papers are rather diverse. The estimates indicate that the Balassa - Samuelson e¤ect can explain from 0 - 3.5% per annum of the existing di¤erence between in‡ation rates in the transition countries and the euro area. 5
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REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL CONVERGENCE REPORT 2014 (prepared in accordance with Article 140(1) of the Treaty on the Functioning of the European Union) [SWD(2014) 177 final]  COM (2014) 326 final, 4 June 2014

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL CONVERGENCE REPORT 2014 (prepared in accordance with Article 140(1) of the Treaty on the Functioning of the European Union) [SWD(2014) 177 final] COM (2014) 326 final, 4 June 2014

Article 1 of the Protocol on the convergence criteria further stipulates that “the criterion on price stability […] shall mean that a Member State has a price performance that is sustainable and an average rate of inflation, observed over a period of one year before the examination, that does not exceed by more than 1.5 percentage points that of, at most, the three best-performing Member States in terms of price stability. Inflation shall be measured by means of the consumer price index on a comparable basis, taking into account differences in national definitions” 5 . The requirement of sustainability implies that the satisfactory inflation performance must essentially be attributable to the behaviour of input costs and other factors influencing price developments in a structural manner, rather than the influence of temporary factors. Therefore, the convergence examination includes an assessment of the factors that have an impact on the inflation outlook and is complemented by a reference to the most recent Commission services' forecast of inflation 6 . Related to
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Report from the Commission (prepared in accordance with Article 122(2) of the Treaty at the request of Lithuania). Convergence report 2006 on Lithuania. [SEC(2006) 614]. COM (2006) 223 final, 16 May 2006

Report from the Commission (prepared in accordance with Article 122(2) of the Treaty at the request of Lithuania). Convergence report 2006 on Lithuania. [SEC(2006) 614]. COM (2006) 223 final, 16 May 2006

The content of the reports prepared by the Commission and the ECB is governed by Article 121(1) of the Treaty. This Article requires that the reports include an examination of the compatibility of national legislation, including the statutes of its national central bank, and Articles 108 and 109 of the Treaty and the Statute of the ESCB and of the ECB. The reports also have to examine the achievement of a high degree of sustainable convergence in the Member State concerned by reference to the fulfilment of the convergence criteria (price stability, government budgetary position, exchange rate stability, long-term interest rates), and take account of several other factors mentioned in the final sub-paragraph of Article 121(1). The four convergence criteria are developed further in a Protocol annexed to the Treaty (Protocol No 21 on the convergence criteria).
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Economic Convergence between Macedonia and European Monetary Union Member States  The Five Maastricht Criteria

Economic Convergence between Macedonia and European Monetary Union Member States The Five Maastricht Criteria

3.2 Empirical Assessment: Examination of Economic Convergence Regarding the price stability criteria, during the period April 2006 – May 2007, Macedonia had annual average inflation rate below the reference value 2.6%, whereas during the period April 2007 – May 2008, the country registered annual average inflation rate, above the reference value, at about 4.4% (Appendix: Table 2). Looking back over the past ten years, inflation rate measured by consumer price index has been rather volatile, averaging 1.82 on an annual basis, over the period 1998 to 2008. With regard to the budgetary performance, Macedonia has a fiscal deficit to GDP ratio below the convergence criteria of 3% specified in the treaty. The amount in 2007 was 0.6% to GDP, whereas in 2008 it declined further down to -1.5% to GDP (Appendix: Table 3). Concerning the Macedonian general government debt to GDP, the results are not so worrying. Macedonian government debt to GDP was above the reference value during the period from 1998 up to 2003, and this ratio has declined since 2004, up to 2008, registering amounts below the reference value. In 2007 this amount was 52% whereas in 2008 it increased slightly to 53% (Table 3). Regarding the exchange rate criterion, Macedonian currency does not participate in ERM2, but traded under fixed exchange rate regime. Overall, in the two years reference period, from April 19, 2006 to April 18, 2008, the Macedonian Denar was not subject to significant depreciation pressures, thus confirming the objective of NRBM to maintain price stability. (Appendix: Table 6 and Figures 4 and 5).
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Report from the Commission (prepared in accordance with Article 122(2) of the Treaty at the request of Malta). Convergence report 2007 on Malta. COM (2007) 258 final, 16 May 2007

Report from the Commission (prepared in accordance with Article 122(2) of the Treaty at the request of Malta). Convergence report 2007 on Malta. COM (2007) 258 final, 16 May 2007

Article 3 of the Protocol on the convergence criteria stipulates: “The criterion on participation in the exchange rate mechanism of the European Monetary System (…) shall mean that a Member State has respected the normal fluctuation margins provided for by the exchange-rate mechanism of the European Monetary System without severe tensions for at least the last two years before the examination. In particular, the Member State shall not have devalued its currency’s bilateral central rate against any other Member State’s currency on its own initiative for the same period”.
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Report from the Commission (prepared in accordance with Article 122(2) of the Treaty at the request of Slovenia). Convergence report 2006 on Slovenia [SEC(2006) 615]. COM (2006) 224 final, 16 May 2006

Report from the Commission (prepared in accordance with Article 122(2) of the Treaty at the request of Slovenia). Convergence report 2006 on Slovenia [SEC(2006) 615]. COM (2006) 224 final, 16 May 2006

The content of the reports prepared by the Commission and the ECB is governed by Article 121(1) of the Treaty. This Article requires that the reports include an examination of the compatibility of national legislation, including the statutes of its national central bank, and Articles 108 and 109 of the Treaty and the Statute of the ESCB and of the ECB. The reports also have to examine the achievement of a high degree of sustainable convergence in the Member State concerned by reference to the fulfilment of the convergence criteria (price stability, government budgetary position, exchange rate stability, long-term interest rates), and take account of several other factors mentioned in the final sub-paragraph of Article 121(1). The four convergence criteria are developed further in a Protocol annexed to the Treaty (Protocol No 21 on the convergence criteria).
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Report from the Commission (prepared in accordance with Article 140(1) of the Treaty on the functioning of the European Union). Convergence report 2012. {SWD(2012) 144 final}. COM (2012) 257 final, 30 May 2012

Report from the Commission (prepared in accordance with Article 140(1) of the Treaty on the functioning of the European Union). Convergence report 2012. {SWD(2012) 144 final}. COM (2012) 257 final, 30 May 2012

The fourth indent of Article 140(1) of the TFEU requires “the durability of convergence achieved by the Member State with a derogation and of its participation in the exchange rate mechanism being reflected in the long-term interest rate levels”. Article 4 of the Protocol on the convergence criteria further stipulates that “the criterion on the convergence of interest rates (…) shall mean that, observed over a period of one year before the examination, a Member State has had an average nominal long-term interest rate that does not exceed by more than 2 percentage points that of, at most, the three best-performing Member States in terms of price stability. Interest rates shall be measured on the basis of long-term government bonds or comparable securities, taking into account differences in national definitions”. At the current juncture, sovereign bond markets in some Member States are subject to severe distortions, which make their long-term interest rates not a meaningful benchmark for the assessment of convergence. Against this background, it would not be appropriate to include the long-term interest rate of Ireland, one of the three best-performing Member States in terms of price stability, in the calculation of the reference value for the long-term interest rate criterion. Hence, the reference value is based on the long-term interest rates in Sweden and Slovenia 9 . The interest rate reference value was calculated to be 5.8% in March 2012.
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Report from the Commission (prepared in accordance with Article 122(2) of the Treaty at the request of Cyprus). Convergence report 2007 on Cyprus. COM (2007) 255 final, 16 May 2007

Report from the Commission (prepared in accordance with Article 122(2) of the Treaty at the request of Cyprus). Convergence report 2007 on Cyprus. COM (2007) 255 final, 16 May 2007

The fourth indent of Article 121(1) of the Treaty requires “the durability of convergence achieved by the Member State and of its participation in the exchange rate mechanism of the European Monetary System being reflected in the long-term interest rate levels”. Article 4 of the Protocol on the convergence criteria further stipulates that “the criterion on the convergence of interest rates (…) shall mean that, observed over a period of one year before the examination, a Member State has had an average nominal long-term interest rate that does not exceed by more than 2 percentage points that of, at most, the three best-performing Member States in terms of price stability. Interest rates shall be measured on the basis of long-term government bonds or comparable securities, taking into account differences in national definitions”.
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Money and Finance Monthly 1 2/1999

Money and Finance Monthly 1 2/1999

♦ Symbols, abbreviations and sources Policy for conversion of statistics to euro Convergence statistics Convergence criteria Exchange rate mechanism 2 ERM2 Purchasing power of the ECU/eu[r]

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Report from the Commission (prepared in accordance with Article 122(2) of the Treaty). Convergence Report 2004 [SEC(2004) 1268]. COM (2004) 690 final, 20 October 2004

Report from the Commission (prepared in accordance with Article 122(2) of the Treaty). Convergence Report 2004 [SEC(2004) 1268]. COM (2004) 690 final, 20 October 2004

The content of the reports 2 prepared by the Commission and the ECB is governed by Article 121(1) of the Treaty, which requires that the reports include an examination of (i) the compatibility of national legislation with the Treaty as well as with the Statute of the European System of Central Banks (ESCB) and of the European Central Bank. The reports must also examine whether a high degree of sustainable convergence has been achieved, by reference to the four convergence criteria relating to (ii) price stability, (iii) the government budgetary position, (iv) exchange rate stability and (v) the long-term interest rate as well as a number of additional factors 3 . The four convergence criteria and the periods over which they are to be respected are further developed in a Protocol annexed to the Treaty (“Protocol on the convergence criteria referred to in Article 121”).
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An alternative reconsideration of macroeconomic convergence criteria for West African Monetary Zone

An alternative reconsideration of macroeconomic convergence criteria for West African Monetary Zone

These criteria has its origin in traditional OCA theory which believes that countries exposed to similar symmetric shocks and business cycles, or possessing mechanisms for the absorption of similar asymmetric shocks may find it optimal to adopt a common currency. Much of this literature focuses on four inter-relationships between the members of a potential OCA. As observed by Frankel and Rose (1998) these are: the extent of trade; the similarity of the shocks and cycles; the degree of labor mobility; and the system of fiscal transfers (if any). The greater the linkages between the countries using any of the four criteria, the more suitable they are for a common currency. These have been encapsulated in a number of primary and secondary quantitative targets that intending members of WAMZ must comply with prior to the commencement of the project. They include: the attainment of single digit inflation that is less than 10 per cent; a budget deficit (excluding grants) to GDP ratio that must be equal to or less than 4.0 per cent; central bank financing of the budget deficit that should be equal to or less than 10 percent of previous year’s tax revenue and maintenance of external reserves to cover at least 3 months of imports. The targets for the secondary convergence criteria specified to compliment the primary ones are: that the level of domestic arrears should be equal to, or less than zero; tax revenue to GDP ratio must be equal to or greater than 20 percent; government wage bill to tax revenue ratio to be equal to or less than 35 percent; public sector investment to tax revenue ratio to be equal to or more than 20 percent; real interest rate to be greater than 0.0 percent, and lastly, the nominal exchange rate movement to be within the band of (± 15 percent)
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An Improved Gauss Newtons Method based Back propagation Algorithm for Fast Convergence

An Improved Gauss Newtons Method based Back propagation Algorithm for Fast Convergence

The steepest descent back-propagation (SDBP) is used in several applications despite its asymptotic slow convergence rate [1][3]. The algorithm is also known as a gradient method. The slow convergence rate of steepest descent algorithm encourages many ides to be developed for faster convergence rate in training a multilayer neural network. The methods that are developed may be divided into two categories. In first category of work the parameters are updated heuristically[2][4][5][6]. The momentum based back- propagation is one of the methods under this category where the momentum factor is fixed, being it always less than one. Another type of back-propagation under this category is variable learning back-propagation where the momentum and learning rates are adjusted in every iteration. In this category the parameters are updated in an ad-hoc manner. In some cases the heuristically modification to the parameters is required to converge the back-propagation algorithm quickly, but the algorithms under this category update several parameters, while only learning rate is related to the steepest descent back-propagation. Another problem of this type of approach is that the values of those parameters are problem oriented.
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Spectral Methods for Volterra Integral Equations

Spectral Methods for Volterra Integral Equations

----(5.5) The values of y t x   i ,  p  , t  x i ,  l   can also be approximated by y i j , with the use of the relationship between the Lagrange interpolation polynomials associate with the Legendre collocation points, as demonstrated in the one-dimensional case. It is expected that the analysis techniques proposed in this work can be used to extend Theorem 4.1 to obtain a spectral convergence rate for (5.5).

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Convergence rate of extremes from Maxwell sample

Convergence rate of extremes from Maxwell sample

The MD and the convergence rate of extremes from Maxwell sample have been widely used in the field of physics. We establish the uniform convergence rate of its distribution to the extreme value distribution and give an improved proof for the pointwise convergence rate of MD.

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On the Rate of Convergence of the Bagged Nearest Neighbor Estimate

On the Rate of Convergence of the Bagged Nearest Neighbor Estimate

for some positive constant Λ independent of ρ, C and σ 2 . This is exactly Theorem 6.2, page 93 of Gy¨orfi et al. (2002), which states that the standard nearest neighbor estimate is of optimum rate for the class F of (1,C,ρ, σ 2 )-smooth distributions (X,Y ) such that X has compact support with covering radius ρ, the regression function r is Lipschitz with constant C and, for all x ∈ R d , σ 2 (x) = V [Y | X = x] ≤ σ 2 (note however that the ordinary k

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On the rate of convergence of bootstrapped means in a Banach space

On the rate of convergence of bootstrapped means in a Banach space

[3] T.-C. Hu and R. L. Taylor, On the strong law for arrays and for the bootstrap mean and vari- ance, Int. J. Math. Math. Sci. 20 (1997), no. 2, 375–382. MR 97k:60011. Zbl 883.60024. [4] D. Li, A. Rosalsky, and S. E. Ahmed, Complete convergence of bootstrapped means and moments of the supremum of normed bootstrapped sums, Stochastic Anal. Appl. 17 (1999), no. 5, 799–814. CMP 1 714 899. Zbl 990.78202.

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Convergence rate of numerical solutions to SFDEs with jumps

Convergence rate of numerical solutions to SFDEs with jumps

This paper is organized as follows: Section 2 gives some preliminary results, in particular, EM numerical solutions to SFDEs with jumps are set up. In Section 3, we discuss the pth-moment convergence of EM numerical solutions to SFDEs with jumps under a global Lipschitz condition. The rate of the mean-square convergence for EM numerical solutions to SFDEs with jumps under a local Lipschitz condition is provided in Section 4. Finally, in order to make the paper self-contained, an existence-and-uniqueness result of solutions to SFDEs with jumps is provided in the Appendix.

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Slovakia and the euro : how Slovakia has out-paced its Visegrád neighbors on the path to economic and monetary union

Slovakia and the euro : how Slovakia has out-paced its Visegrád neighbors on the path to economic and monetary union

administration used its mandate to carry out extensive fiscal and structural reforms, pursue EU membership and meet the Maastricht criteria. As the public increasingly felt the effects of Dzurinda’s austere economic policies, it became clear that he stood to lose the 2006 elections. In order to ensure continued fiscal discipline and entrench Slovakia in its path to the euro, the Dzurinda government moved the country into ERM II in November of 2005 (Johnson 2008; Rosenberg 2008). This decision effectively tied the hands of future administrations and locked the country into an EMU-bound trajectory. ERM II commits a country to fiscal rectitude by immediately becoming the country’s foremost symbol of credibility. This component of the Maastricht criteria is effective not because of EU enforcement, but because a withdrawal from the process is likely to instigate dramatic ramifications in the financial markets (Johnson 2008). This is exactly what happened in Slovakia.
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