Hungary and the Monetary Union - Prospects and Implications
International Conference on Economic and Social Studies (ICESoS2015)
9 Pages Posted: 22 Dec 2015
Date Written: April 21, 2015
This paper addresses economic and legal criteria for Hungarian adoption of the common currency using qualitative analysis of available documents and data as well as previous research. The economic convergence criteria ensure that Hungary’s economy is prepared to adopt the euro, while the legal convergence criteria ensure that national legislation, the national central bank and monetary policy issues are compatible with the treaty. Economic convergence criteria addressed in the paper include price stability, soundness and sustainability of public finances, exchange-rate stability through participation in the Exchange Rate Mechanism [ERM II] for at least two years without strong deviations from the ERM II central rate, and long-term interest rates to assess the durability of the convergence achieved by fulfilling the other criteria. The paper concludes that Hungarian economy is going to benefit from this process, however there are many challenges that have to be addressed, such as stabilization of inflation expectations at low level, the establishment of institutions and mechanisms ensuring a close link between the evaluation of productivity and wages.
Keywords: European Monetary Union, Hungary, Exchange Rate Mechanism (ERM II)
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