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If we make the converter side DC link current the same as the inverter side DC link current in a PWM converter-inverter system, no current will flow through the DC link capacitor and as a result, no DC link voltage variation occurs. This leads to the possibility of significantly reducing the size of DC link capacitors which are expensive, bulky and have a lifetime limit, if we can manage to match inverter and converter currents at the DC link. However, a converter inherently involves a delay in supplying the required current. Therefore, matching the converter current to the inverter current necessitates the use of a differentiator to meet the requirements of a fast dynamic response. But in practice, differentiating the measured value is almost impossible. In this paper, the authors propose a new differentiation method that utilizes a one-step predictor developed from converter and inverter dynamics. In the model, the DC link voltage is regarded a variable. Since the inverter current compensation term is applied in terms of voltage, the response is fast. Simulation and experiments are performed with only 40 /spl mu/F DC link capacitance for a 9 kW motor, and the results support the validity of the proposed scheme.