Macroeconomics 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, though its macroeconomics policies were similiarly to that Poland embraced.

Pedagogical Objectives:

• To discuss various tools used as a part of monetary policy
• To study monetary policy measures adopted by Polish government
• To study monetary policy measures taken by Hungary
• To analyse the differences between the monetary policy measures of Poland and Hungary.

Keywords : Hungarian and Polish monetary policies; Interest rates; Inflation targeting monetary policy; Revaluation and devaluation of currency; Leszek Balcerowicz and Zsigmond Jarai; Maastricht criteria; Budget deficits; Hyperinflation; Gross domestic product (GDP)