The onset of the financial crisis in 2008 has highlighted the problems of diverging external imbalances within Economic and Monetary Union (EMU) and the role of persistent losses in competitiveness. This paper starts by investigating some of the competitiveness factors which contributed to...

This report discusses the role of the European Union’s full employment objective in the conduct of the ECB’s monetary policy. It first reviews a range of indicators of full employment, highlights the heterogeneity of labour market outcomes within different groups in the population and across...

The ECB’s price stability mandate has been defined by the Treaty. But the Treaty has not spelled out what price stability precisely means. To make the mandate operational, the Governing Council has provided a quantitative definition in 1998 and a clarification in 2003. The landscape has...

This study aims to generalize the Krugman target zone model for the case of terminal condition of joining a currency area. Using the terminal condition and the 'smooth pasting conditions', both analytical and numerical solutions of the problem are obtained. The proposed model is more adequate...

This paper develops a convergence model of the term structure of interest rates in context of entering the European Monetary Union (EMU). Compared to other models developed so far in this field, our model specification ensures convergence of the domestic short-term interest rates to the euro...

Understanding asymmetric risks in macroeconomic variables is challenging. Most structural models used for policy analysis are linearised and therefore cannot generate asymmetries such as those documented in the empirical growth-at-risk (GaR) literature. This report examines how structural models...