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The quest for monetary integration – the Hungarian experience

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  • Zoican, Marius Andrei

Abstract

From 1990 onwards, Eastern European countries have had as a primary economic goal the convergence with the traditionally capitalist states in Western Europe. The usage of various exchange rate regimes to accomplish the convergence of inflation and interest rates, in order to create a fully functional macroeconomic environment has been one of the fundamental characteristics of states in Eastern Europe for the past 20 years. Among these countries, Hungary stands out as having tried a number of exchange rate regimes – from the adjustable peg in 1994‐1995 to free float since 2008. In the first part, this paper analyses the macroeconomic performance of Hungary during the past 15 years as a function of the exchange rate regime used. I also compare this performance, where applicable, with two similar countries which have used the most extreme form of exchange rate regime: Estonia (with a currency board) and Romania, who never officialy pegged its currency and used a managed float even since 1992. The second part of this paper analyzes the overall Hungarian performance from the perspective of the Optimal Currency Area theory, therefore trying to establish if, after 20 years of capitalism, and a large variety of monetary policies, Hungary is indeed prepared to join the European Monetary Union.

Suggested Citation

  • Zoican, Marius Andrei, 2009. "The quest for monetary integration – the Hungarian experience," MPRA Paper 17286, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:17286
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    File URL: https://mpra.ub.uni-muenchen.de/17286/1/MPRA_paper_17286.pdf
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    References listed on IDEAS

    as
    1. Zsolt Darvas & György Szapáry, 1999. "Financial Contagion under Different Exchange Rate Regimes," MNB Working Papers 1999/10, Magyar Nemzeti Bank (Central Bank of Hungary).
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    More about this item

    Keywords

    exchange rate regimes; free float; Eastern Europe; Optimal Currency Area Theory;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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