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Hungary's entry into the euro area: Lessons for prospective members from a monetary policy perspective [An article from: Economic Systems]
Book Details
Author(s)P.L. Siklos
PublisherElsevier
ISBN / ASINB000PC072O
ISBN-13978B000PC0729
MarketplaceGermany 🇩🇪
Description
This digital document is a journal article from Economic Systems, published by Elsevier in 2006. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.
Description:
This paper evaluates the conduct of monetary policy in Hungary using standard Taylor rules as well as extended rules that incorporate real exchange rate effects. Moreover, we explicitly consider the impact of future euro area entry by estimating instrument rules that permit an influence from Maastricht Treaty inflation requirements via the estimation of Markov switching models as well as by estimating a differential rule vis-a-vis the existing euro area. Lastly, the paper also considers the impact on policy rules from the large data revision that affects real exchange rate and output estimates. I find that interest rate setting behavior in Hungary does not resemble that of the euro area. Also, counterfactual experiments reveal that the potential macroeconomic costs of entry into the euro area sooner rather than later may be lower than if membership in the single currency area is delayed beyond 2008.
Description:
This paper evaluates the conduct of monetary policy in Hungary using standard Taylor rules as well as extended rules that incorporate real exchange rate effects. Moreover, we explicitly consider the impact of future euro area entry by estimating instrument rules that permit an influence from Maastricht Treaty inflation requirements via the estimation of Markov switching models as well as by estimating a differential rule vis-a-vis the existing euro area. Lastly, the paper also considers the impact on policy rules from the large data revision that affects real exchange rate and output estimates. I find that interest rate setting behavior in Hungary does not resemble that of the euro area. Also, counterfactual experiments reveal that the potential macroeconomic costs of entry into the euro area sooner rather than later may be lower than if membership in the single currency area is delayed beyond 2008.
