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Evidence on EU monetary system

Evidence on EU monetary system. Criterion 5: homogeneous preferences. Currency union member countries must share a wide consensus on the way to deal with shocks. Germany and Italy: a difficult relationship:. The Maastricht Treaty: five entry conditions.

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Evidence on EU monetary system

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  1. Evidenceon EU monetarysystem

  2. Criterion 5: homogeneous preferences • Currency union member countries must share a wide consensus on the way to deal with shocks. • Germany and Italy: a difficult relationship:

  3. The Maastricht Treaty: fiveentryconditions • A selection process to certify which countries had adopted a ‘culture of price stability’ (i.e., German-style low inflation): countries have to fulfill five convergence criteria: • inflation: not to exceed by more than 1.5 percentage points the average of the 3 lowest inflation rates among EU countries;

  4. The first years (until the Great Crisis) • Asymmetries: some evidence of decrease:

  5. Interpretation of the convergence criteria: inflation • Straightforward fear of allowing in unrepentant inflation-prone countries

  6. The debt and deficit criteria in 1997

  7. Implication for bond markets: the facts

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