Growth and Regional Development in an Enlarged European Union
Edited by Gertrude Tumpel-Gugerell and Peter Mooslechner
Chapter 16: The costs and benefits of an early EMU participation for Hungary
16. The costs and beneﬁts of an early EMU participation for Hungary István Hamecz and Ágnes Horváth 16.1. INTRODUCTION The main economic policy challenge for applicant countries is to ﬁnd the optimal policy mix which ensures steady and rapid catching up while maintaining nominal stability during the convergence process. Although the uncertainty surrounding the exact time frame of accession makes it diﬃcult to ﬁne-tune economic policy, Hungary has a clear-cut medium-term strategy. Moreover, its main economic policy goal, namely maintaining the conditions for macroeconomic stability and sustained growth, coincides with EMU entry requirements. At the present stage of Hungarian economic development, and given an economic policy aimed to further convergence, the fulﬁlment of the Copenhagen criteria would not cause any noticeable problem for the economy. When Greece, Portugal and Spain were at the same distance from EMU membership as Hungary currently is, they showed similar, in some cases even larger, deviations in terms of both nominal and real criteria. The high degree of economic interdependence between Hungary and the euro area suggests that the criteria required by the optimal currency area (OCA) theory have already been largely met as well. Although establishing the required degree of monetary stability may involve trade-oﬀs in the short run, these would also be present without the prospect of EMU participation. Moreover, in the case of Hungary long-term gains will more than compensate for the short-term cost of disinﬂation. Based on a careful cost–beneﬁt analysis we...
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