What is the purpose of the Maastricht convergence criteria? Some thoughts on the recent debate

In this paper, the theoretical underpinnings of the Maastricht “entry conditions” in the European Monetary Union are discussed. The issue is analyzed in the light of two different theoretical approaches. In the optimal currency areas approach, the convergence criteria are explained as tools to select a group of countries with labour market flexibility sufficient to adjust to asymrnetric shocks with no need of currency devaluations. In the credibility approach, which has become dominant in the economic literature since ‘80s, the fullfillment of the Maastricht convergence criteria is instead interpreted as a guarantee of the high inflation countries’ commitment to the attainment of price stability. From a broad review of the recent literature, it appears that none of the two approaches presented here provides sufficiently strong arguments to support the adoption of the Maastricht convergence criteria. On the contrary, it is often maintained that the Maastricht “entry conditions” into EMU may paradoxically hamper high inflation countries’ monetary convergence, rather than facilitate it.