Monetary Policy Case Study

Monetary Policy: Hungary vs Poland

OR

Abstract:
Hungary and Poland, two of the fastest growing economies in central Europe, are to join the European Union in May 2004. Since the 1980s, both countries had experienced unfavourable political and economic conditions. Both had a history of hyperinflation, high levels of foreign debt and a poor institutional and economic framework. During the 1990s, these countries went through a transitional phase and intensified their efforts for economic revival. By January 2004, with an efficient monetary policy, Poland had been successful in curbing the inflation and achieving price stability. In contrast, Hungary was struggling with high interest rates.

Pedagogical Objectives:

To discuss the relationship between interest rates, inflation and the value of the currency in the background of the policies of two central European countries.

Keywords : Hungarian and Polish monetary policies, Interest rates, Inflation targeting monetary policy, Revaluation and devaluation of currency, Leszek Balcerowicz and Zsigmond Jarai, Maastricht criteria, Monetary Policy Case Study, Budget deficits, Hyperinflation, Gross domestic product (GDP), Composition of currency basket, Reference rate and exchange rate, Forint and zloty, European Monetary Union, Narodowy Bank Polski (National Bank of Poland), Magyar Nemzeti Bank (Central Bank of Hungary)