Hamecz, István; Horváth, Ágnes --- "The costs and benefits of an early EMU participation for Hungary" [2003] ELECD 22; in Tumpel-Gugerell, Gertrude; Mooslechner, Peter (eds), "Economic Convergence and Divergence in Europe" (Edward Elgar Publishing, 2003)

Book Title: Economic Convergence and Divergence in Europe

Editor(s): Tumpel-Gugerell, Gertrude; Mooslechner, Peter

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843762416

Section: Chapter 16

Section Title: The costs and benefits of an early EMU participation for Hungary

Author(s): Hamecz, István; Horváth, Ágnes

Number of pages: 9

Extract:

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 main-
taining 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 strat-
egy. Moreover, its main economic policy goal, namely maintaining the con-
ditions 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 Copen-
hagen 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 participa-
tion. Moreover, in the case of Hungary long-term gains will more than
compensate for the short-term cost of disinflation. Based on ...