IDEAS home Printed from https://ideas.repec.org/a/pal/compes/v46y2004i1p104-126.html
   My bibliography  Save this article

Convergence Expectations and Convergence Strategies. Lessons from the Hungarian Experiences in the pre-EU period1

Author

Listed:
  • Agnes Csermely

    (Magyar Nemzeti Bank, Szabadság tér 8-9, H-1850 Budapest, Hungary.)

Abstract

Eurozone convergence provides a unique opportunity for accession countries to abandon macroeconomic stabilisation policies that suffer from weak credibility. On the other hand, expectations of future improvements in macroeconomic variables and trend appreciation of the currency may undermine the relationship between interest rates, exchange rates and economic fundamentals, making the economy vulnerable to sudden changes in market sentiments regarding the timing and path to Eurozone accession. Recent developments in Hungary illustrate the impact of changing expectations on exchange rate and interest rate volatility. Two lessons can be drawn from the Hungarian experience. First, benign market sentiment and easier access to finance does not imply less pressure to correct macroeconomic imbalances in the long run. Second, convergence strategies should be robust with respect to sudden shifts in capital flows. Programmes should maintain the shock absorbing capacity of fiscal and monetary policies and offer a contingency margin to ensure compliance with the announced adjustment plan in case of unforeseen developments. Slower convergence programmes might be more successful. Comparative Economic Studies (2004) 46, 104–126. doi:10.1057/palgrave.ces.8100043

Suggested Citation

  • Agnes Csermely, 2004. "Convergence Expectations and Convergence Strategies. Lessons from the Hungarian Experiences in the pre-EU period1," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 46(1), pages 104-126, March.
    • Handle: RePEc:pal:compes:v:46:y:2004:i:1:p:104-126
    as

    Download full text from publisher

    File URL: http://www.palgrave-journals.com/ces/journal/v46/n1/pdf/8100043a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: http://www.palgrave-journals.com/ces/journal/v46/n1/full/8100043a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lucjan T. Orlowski, 2005. "Targeting Relative Inflation Forecast as Monetary Policy Framework for Adopting the Euro," William Davidson Institute Working Papers Series wp754, William Davidson Institute at the University of Michigan.
    2. Orlowski, Lucjan T., 2004. "Exchange rate risk and convergence to the Euro," ZEI Working Papers B 25-2004, University of Bonn, ZEI - Center for European Integration Studies.
    3. Jesús Rodríguez López & José Luis Torres Chacón, 2007. "Following the Yellow Brick Road to the Euro?: Czech Republic, Hungary, and Poland," Eastern European Economics, Taylor & Francis Journals, vol. 45(6), pages 46-79, November.
    4. Kobor, Adam & Szekely, Istvan P., 2004. "Foreign exchange market volatility in EU accession countries in the run-up to Euro adoption: weathering uncharted waters," Economic Systems, Elsevier, vol. 28(4), pages 337-352, December.
    5. Matkowski, Z. & Prochniak, M., 2004. "Real Economic Convergence in the EU Accession Countries," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 1(3), pages 5-38.
    6. Orlowski, Lucjan T., 2008. "Relative inflation-forecast as monetary policy target for convergence to the euro," Journal of Policy Modeling, Elsevier, vol. 30(6), pages 1061-1081.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:compes:v:46:y:2004:i:1:p:104-126. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.