thesis work zsolt szabo 2011
TRANSCRIPT
-
7/30/2019 Thesis Work Zsolt Szabo 2011
1/38
Thesis work
Zsolt Szab
2011
-
7/30/2019 Thesis Work Zsolt Szabo 2011
2/38
Corvinus University of Budapest
Faculty of Business Administration
International Study Programs
The consequences of Hungarys accession
to the Economic and Monetary Union
should we join or NOT?
Zsolt Szab
BA in International BusinessInternational Business
2011
Thesis Supervisor: Tams Halm
-
7/30/2019 Thesis Work Zsolt Szabo 2011
3/38
3
I, Zsolt Szab in full knowledge of my liability, hereby declare that all the texts, figures and
tables in this Thesis Work are based solely on my own individual work. Where I have
drawn on the work, ideas and results of others, this has been appropriately acknowledged in
the thesis in the form of citation and references. I declare, furthermore, that the thesis has
not been presented to any other institution before.
-
7/30/2019 Thesis Work Zsolt Szabo 2011
4/38
4
Table of content
1. Introduction ..................................................................................................................... 5
2. Optimum Currency Areas ................................................................................................ 7
2.1. Possible benefits from joining a currency area ........................................................ 8
2.2. Costs of joining a currency area ............................................................................... 9
3. The history of the Economic and Monetary Union ....................................................... 11
3.1. Stage One of the EMU ........................................................................................... 11
3.2. Stage Two of the EMU .......................................................................................... 12
3.3. Stage Three of the EMU ........................................................................................ 13
3.4. The Maastricht convergence criteria ...................................................................... 14
3.5. The EMU as Optimum Currency Area .................................................................. 15
4. Hungary and the Economic and Monetary Union ......................................................... 19
4.1. The Benefits of joining the EMU ........................................................................... 20
4.2. The costs of joining the EMU ................................................................................ 21
4.3. The timing of the accession .................................................................................... 23
4.4. Hungarys EMU maturity ...................................................................................... 26
4.5. The experience of some other EMU members ....................................................... 29
4.6. Should Hungary join or not? .................................................................................. 31
5. Conclusion ..................................................................................................................... 32
6. Appendices .................................................................................................................... 33
Appendix 1Fixed euro conversion rates ........................................................................ 33
Appendix 2Euro banknotes ........................................................................................... 34
7. Bibliography and references .......................................................................................... 36
-
7/30/2019 Thesis Work Zsolt Szabo 2011
5/38
5
1. Introduction
The introduction of the euro as the currency for more than 300 million people was
one of the biggest and most tactile steps in the history of the European Union, and was alsothe most important economic, political and social event in the past decade. The euro first
appeared on 1 January 1999, but in the beginning was used only for accounting purposes
and electronic payment. On 1 January 2002 the first euro banknotes and coins went into
circulation. From February 2002, the euro officially replaced the national currencies of
twelve1
member states of the European Union and became a symbol of the European
integration and the European Union. Today the Euro is the official currency in 17 of 27
member states of the EU.
By joining the European Union in 2004 Hungary has also committed itself to the
common currency, as for the newly joined countries the introduction of the euro will not be
an option, but an obligation as soon as they fulfil the Maastricht criteria. The only
exceptions are the United Kingdom and Denmark, which countries have opt-out rights.
This means that these member states are not obliged to join the euro zone, even if they
fulfil the necessary criteria. Sweden has not negotiated for opt-out, however the country
deliberately fails to fulfil the criteria, because of a 2003 referendum in which voters voted
against the introduction of the euro in Sweden.
The issue of introducing the euro in Hungary has caught my attention for two
reasons. The main reason was that in the past decade, every now and then the timing of the
countrys euro-accession came up to the front, turned up in the news and was a popular
topic for discussions. However in the recent years the possible date of introduction of the
Hungarian euro seemed to be farer in the future than before. The other was to find out what
makes developed countries like Sweden, Denmark of the United Kingdom think that they
are better off sticking to their own currencies, while others say that introduction of the euro
has so much benefits. The aim of this paper is to assess the possible costs and benefits of
giving up the national currency and replacing it with the euro.
1 Countries that introduced euro banknotes and coins on 1 January 2002: Austria, Belgium, Germany, Finland,
France, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain.
-
7/30/2019 Thesis Work Zsolt Szabo 2011
6/38
6
In the first part of the thesis I will introduce the theory of optimum currency areas,
with a special emphasis on what can be the benefits and drawbacks of joining a single
currency zone. Furthermore I will try to highlight the relationship and interdependence
between a countrys economy, internal qualities and the consequences of joining a
monetary union. After this I will take a look at the history of the European Monetary Union
and examine whether is fulfils the criteria of being an optimum currency area. In the second
half of the thesis I will take a closer look at Hungarys current economic situation and
compare it to the EMU and some selected countries. In these chapters of thesis I will also
give some proposals regarding the timing of the euro accession and argue whether Hungary
should join (if so) the monetary union with a strong or a weak currency.
As one of the hottest economic issues today is the current euro-crisis that emerged
right after the global financial crisis, I believe it is unavoidable to address this issue as well
in a paper, which is closely related to the euro. However, when writing my thesis, I
assumed that the euroas one of the main achievements and symbol of the EU - will stay
as the legal tender of the union and throughout the integration process Hungary and other
new member states of the EU will be able to join the monetary union sooner or later.
-
7/30/2019 Thesis Work Zsolt Szabo 2011
7/38
7
2. Optimum Currency Areas
The theory about optimum currency areas emerged in the 1960s out of the debates
about fixed versus flexible exchange rate systems, throughout the works of Robert
Mundell, Ronald McKinnon and Peter Kenen. By this time the deficiencies of the Bretton
Woods system became clear, the current account deficit of the member countries was rising
constantly. The works of Mundell, McKinnon and Kenen addressed this issue and provided
a solution. Their theoretical analysis can be used to measure how mature and well-prepared
a group of countries is to create an economic and monetary union. Based on their theories
an optimum currency area has the following attributes (Palnkai, 2004):
Flexible and properly functioning factor markets, mobility of factors High degree of internal homogeneityno threat of asymmetric shocks Possibility of appropriate budget transfers
According to Mundell (1961) the most important feature of the optimum currency
area is the free movement of production factors (capital and labour), which implies that the
adjustment of prices and wages take place without significant losses or shocks. Also, it
must be possible to handle economic disruptions with appropriate budget transfers, which
means the necessity of good and adequate fiscal policy. Mundell also highlighted, that theintroduction of a fixed exchange rate system can be beneficial for those regions, which are
highly integrated through the movements of goods and factors. Since in a fixed exchange
rate system or in a monetary union the room for individual monetary policy is very limited,
it is necessary that the business cycles are the same in the member countries.
In contrast to Mundell, McKinnons argument places more emphasis in on the
openness of the economies, but he also admitted the importance of free movement of
capital and labour. In his argument he approached the issue from a whole other point of
view than Mundell. According to McKinnon (1963), exchange rate fluctuations have
specifically negative effect on both competitive sectors, because they constantly need to
adjust to the changing exchange rates, and to non-competitive sectors, through the
reallocation of resources. McKinnon also stated that a fixed exchange rate system is
indispensible for the optimal operation of factor movements.
-
7/30/2019 Thesis Work Zsolt Szabo 2011
8/38
8
Kenen (1969) pointed out, that the most important feature is the high level
homogeneity of the countries creating a currency union. The high level homogeneity
minimizes the possibility of emerging asymmetric shocks2, which is crucial for the optimal
operation of such unions. This homogeneity means that there is a significant similarity in
the countries economic structure and characteristics.
As Palnkai (2003) states, whenever a country joins a monetary union, it loses its
power to change the exchange rate of its currency. With the elimination of exchange rate
interventions the economic stability and competitiveness depends on the flexibility of
prices and wages.
What can be noted as a common idea of all of the arguments above is the necessity
of high level integration and similarity of the countries. This similarity does not only mean
economic, but cultural similarity as well. All in all, an optimum currency area can only be
formed by member states that act and function like being one big country.
2.1. Possible benefits from joining a currency area
Both fixed and flexible exchange rate systems have positive and negative effects onthe economy. Flexible exchange rates can prevent the development of economic shocks,
although it makes prices more unpredictable. Fixed exchange rate systems or currency
areas tend to be more predictable, making a more stable ground for decisions involving
international transactions. The benefits stemming from being a part of a monetary union
occur as monetary efficiency gains at a microeconomic level in the joining country. This
means that the country can achieve a lower level of inflation and a better price stability,
simply because of the disappearing exchange rate risk (FX risk). Furthermore the
eliminated FX risk also reduces the risk-premium required by foreign investors, leading to
lower interest rates and cheaper financing costs. The necessity of hedging the FX risk also
ceases. At the same time a higher risk countrylike Hungarycan get a better country risk
2 Asymmetric shock: Shocks that affect only some of the member countries in a monetary union, or shocks
that are contrary to each other in the different member states.
-
7/30/2019 Thesis Work Zsolt Szabo 2011
9/38
9
rating. The financing benefits and the better integration to the international goods market
can let the country to sustainably run a higher current account deficit matched by an
increased capital account. (Palcz, 2004)
As a consequence of the above the countrys ability to attract capital is likely toincrease. The level of monetary efficiency gains are determined by the joining countrys
integration to the monetary union, while the integration depends on the extent of the
countrys trade with the union, the possibility of free movement of production factors and
structural similarities.
2.2. Costs of joining a currency area
While the benefits of giving up the national currency can be detected at microeconomic
levels, the costs occur at macroeconomic level as economic stability losses. Similarly to the
benefits, the extent of these costs is highly correlated with the level of integration to the monetary
union. The higher the level of integration, the lower the costs and stability losses will be when a
country decides to join a currency area.
The losses stem from giving up monetary autonomy, which results that the country
sacrifices one major tool that can reduce the effects of asymmetric shocks, stabilize output and
employment. Furthermore the country will not be able to devaluate its currency anymore. In this
respect the integration of the country and the fluctuation of business cycles are crucial, since the
common monetary policy will have to work in all member states of the currency zone.
Krugman (2003) illustrates this situation on a real simple example in his book, which I am
about to describe in short. Lets imagine that the external demand for products of country A falls.
If country A is not part of a monetary union and has flexible exchange rates , its currency can
simply depreciate to the equilibrium, where demand for its products returns to the original level.
However, if country A was memberof a monetary union or a fixed exchange rate system and was
the only member to face a drop in demand for its goods, the common currency would not depreciate
(or at least not as needed for country A). Consequently as demand for the products drop the
employment rate will drop as well, and can only be restored to the original level by decreasing
prices and wages of workers. If country A is highly integrated to the monetary union, even a
small decrease in prices will generate extra demand within the union for its goods fairly quickly,
-
7/30/2019 Thesis Work Zsolt Szabo 2011
10/38
10
GG
LL
Degree of integration between the joining
country and the exchange rate area.
Themonetaryefficiencygain(GG)
and
economicstabilityloss(LL)forthe
joiningcountry.
The GG and LL curves
Source: Krugman (2003)
Figure 1 which would restore
employment rate to the
original level. This quick
reaction for price
differences will come from
the fact, that the country
can easily trade its goods
with member states of the
currency area and
consumers in the other
countries can easily
compare prices, because of
the common currency.
Another possible or
alternative solution would be, that the workers of country A simply move abroad to find work,
which in the end also would restore employment rate.
Figure 1 shows the relation between the degree of integration and monetary efficiency
gains and economic stability losses. It can be seen on the diagram that as the degree of integration
raises so does the gains from joining the currency area, while at the same time economic stability
losses decrease. At the point where GG and LL curves intersect each other, the gains and losses of
giving up the own currency will cancel each other out. From this level of integrity the country is
better off joining the monetary union. At an integrity level lower than at the point of intersection
costs exceed benefits, implying that it is best to keep the own currency.
Another type of cost, which a country has to face when joining a monetary union, is the loss
of seigniorage income that comes from issuing their own money and minting coins. In the
Economic and Monetary Union each member states have their own euro (the backsides of notes and
coins differ from country to country), and also receive a part of the seigniorage from the European
Central Bank based on the contribution to the registered capital of the ECB. The contribution is
calculated the countrys population and GDP compared the EUs population and GDP. In the case
of Hungary the seigniorage it would receive after its contribution is less, than the seigniorage
income today. (Csajbk Csermely, 2002)
-
7/30/2019 Thesis Work Zsolt Szabo 2011
11/38
11
3. The history of the Economic and Monetary Union
The traces of the creation of the Economic Monetary Union go back to the 1960s,
namely the 1968 Barre plan, and a 1969 initiative by the European Commission for the
better coordination of economic policy making and monetary cooperation. The
consequence of this was the Werner plan, a three-stage program which would result in
locked European exchange rates and the integration of national central banks into a
common European system of banks. The two major reasons behind these moves have
remained motives for the adoption of the euro, and are the following: enhancing Europes
role in the international economy and the monetary system and to turn the European Union
into a genuinely unified market. However the project suffered setbacks in 1971, after the
dollars convertibility to gold was suspended by the US government.
The debate was re-launched at the Hannover Summit in June 1988 and the objective
of the progressive realization of the Economic and Monetary Union (EMU) was confirmed
by the European Council. The Council then mandated a committee to study and propose
stages leading to the union. As a result the committee led by Jacques Delors, president of
the European Commission, proposed that the economic and monetary union can be
established through three evolutionary stages. (Delors-plan)
3.1. Stage One of the EMU
Based on the Delors report the first stage of the implementation process of the EMU
started on 1 July 1990. As the main principle of this chapter all restrictions on capital
movements between member states were abolished on that date. Further tasks of the first
stage included increasing co-operation between central banks, free use of the EuropeanCurrency Unit (ECU, the predecessor of the Euro) and the improvement of economic
governance.
-
7/30/2019 Thesis Work Zsolt Szabo 2011
12/38
12
In March 1990 the Committee of Governors of the central banks was given new
responsibilities of organizing consultations for promoting the coordination of monetary
policies of the different member states to achieve the necessary price stability.
Additionally, to be able to realize stages two and three, some legal preparationswere also started at an early stage, for example the revision of the Treaty of Rome in order
to establish the required institutional framework. This was done on the Intergovernmental
Conference on EMU in 1991. Other preparatory steps included the identification of key
issues, the elaboration of a work program by 1993, the establishment of working groups
and the definition of mandates of sub-committees accordingly.
3.2. Stage Two of the EMU
The start of the second chapter of the EMU was marked by the establishment of the
European Monetary Institute (EMI) on 1 January 1994. With this step the Committee of
Governors of central banks ceased to exist. This new, transitory institution has also shown
how the monetary integration process within the Community progressed. The main tasks of
the EMI was to further strengthen central bank cooperation and monetary policy
coordination and to make preparations required by the establishment of the European
System of Central Banks (ESCB) which would be the key in the creation of the single
monetary policy and single currency in the third stage of the EMU. The EMI had no
competence for carrying out foreign exchange intervention and the conduct of monetary
policy also remained the preserve of national authorities. Actually, the EMI could be seen
as a forum for consultation and exchange of views on policy issues. This forum has also
specified the regulatory, organizational and logistical framework of the ESCB.
In December 1995 the European Council agreed that the name of the new currency
unit to be introduced in Stage Three would be euro and confirmed that the third stage
would start on 1 January 1999. Based on the detailed proposals of the EMI a chronological
sequence of events for the conversion to the euro was pre-announced.
-
7/30/2019 Thesis Work Zsolt Szabo 2011
13/38
13
Simultaneously, the EMI carried out a preparatory work on the future of monetary
and exchange rate relationships between the euro zone and other EU member states. The
report presented in 1996 formed the basis for the new exchange rate mechanism system
(ERM II), adopted in June 1997.
On 2 May 1998 the Council of the European Union decided that 11 MS had fulfilled
the necessary conditions and can participate in the third stage of the EMU. This also meant
that they would adopt the single currency on 1 January 1999. Also in May the ministers of
finance of the 11 member states alongside with the heads of national central banks, the
European Commission and the EMI agreed that the current bilateral central rates of the
currencies would serve as the irrevocable conversion rates for the euro. On 25 May 1998
the President, Vice-President and four other members of the Executive Board of the
European Central Bank (ECB) was appointed. This took effect from 1 June, which date
also marks the establishment of the ECB. As the EMI has completed its task in good time it
went into liquidation in accordance with Article 123 of the Treaty establishing the
European Community. The rest of 1998 was used to final testing of newly built systems
and procedures.
3.3. Stage Three of the EMU
On 1 January 1999 the third and final stage of the EMU started with irrevocably
fixing the exchange rates of the currencies of 11 member states to the euro and with the
conduct of a single monetary policy under the responsibility of the European Central Bank.
The initial participating countries were Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. Around this time, the euro
functioned only in accounts. The actual physical usage of euro notes and coins began on 1
January 2002.
The number of countries which adopted the euro as a legal tender has been
increasing ever since. In 2001 Greece was next to adopt the euro, followed by Slovenia in
-
7/30/2019 Thesis Work Zsolt Szabo 2011
14/38
14
2007. In 2008 both Cyprus and Malta joined the euro zone. Slovakia and Estonia became
members in 2009 and 2011 respectively.
3.4. The Maastricht convergence criteria
The Treaty on European Union (or as better known, the Maastricht Treaty), entered
into force on 1 November 1993, defines 5 convergence criteria regarding price and
exchange rate stability and sustainable financing of the country, which must be fulfilled by
every candidate before the accession to the European and Monetary Union. The reason
behind the criteria is to ensure that the EMU as a group of countries fulfils the requirements
of being an optimum currency area as much as possible. The Maastricht convergence
criteria are the following:
The rate of inflation cannot exceed by more than 1.5% the averageinflation rate of the three countries with the best price stability. Also, this
low rate of inflation needs to be sustainable.
Annual budget deficit cannot exceed 3% of GDP Gross national debt level should not exceed 60% of GDP, however a
country with a higher debt level may still adopt the euro provided its
debt level is falling steadily
The national currency must have stayed within a certain pre-set band,and the currency cannot be devaluated against any of the member states
within a 2 year period. This means
The average long-term nominal interest rate must not be by more than 2percentage points above than the average of the three member states with
the lowest inflation over the previous year.
However, it is not enough to reach the above criteria before the adoption of the
euro; they are to be kept afterwards as well, except for the inflation, which is not regulated
within the EMU. The monitoring of the member states, whether they maintain to keep
-
7/30/2019 Thesis Work Zsolt Szabo 2011
15/38
15
themselves to the criteria or not, and possible sanctions for the latter case are regulated by
the Stability and Growth Pact (SGP), adopted in 1997. (Palcz, 2004)
The SGP ensures, that member states continue to observe the Maastricht
convergence criteria even after they have adopted the euro. This guarantees that membercountries remain committed to strict fiscal policies and dont endanger the stability neither
of the common currency nor of their own economy.
It can be seen that during the creation of the Maastricht convergence criteria the
member states had to intention to include criterion, which are relatively easy to measure
and compare. Many critics of the Maastricht criteria highlight that it takes into
consideration only quantifiable data, while it does not account for the real economy and
structure, although these are equally important factors for a currency area. In the cases of
the newer member states, the EU takes into consideration real economic factors as well.
3.5. The EMU as Optimum Currency Area
The opinions of experts differ concerning the extent to which the European
Monetary Union can be considered as an optimum currency area and in the recent crisis the
voice of those who say that the introduction of the common currency was a mistake
emerged. What is common, that the number of experts, who say that the monetary union is
an optimum currency are is very limited.
As Pter Rna in a recent (01.07.2011) interview to ATV highlighted the common
currency is not a tool to, but a fruit of integration, and according to him the necessary level
of integration within the Economic and Monetary Union is missing. Rna admits that there
is a competitive core within the EMU (Germany, France, Austria, Finland, Netherlands and
Luxemburg), but the rest of the countries are on the periphery. The countries on the
periphery lose their competitiveness and suffer, because the euro is overvalued for them,
while in case of the competitive countries, the euro is undervalued. Consequently for the
less developed countries in the current situation the euro in itself hinders the integration to
the developed countries. Also, a great difference in the structure of the economies can be
-
7/30/2019 Thesis Work Zsolt Szabo 2011
16/38
16
discovered. In the interview Mr. Rna used Greece as an example, which relies heavily on
tourism; while other countries like for example Germany rely on their automobile industry.
This and similar types of structural differences weaken the euro zone, and lead to instability
as this is a source for asymmetric shocks to emerge. In the 2008 financial crisis the income
from tourism in Greece dropped significantly. This appeared as an asymmetric shock
compared to the core countries, which did not perceive such an impact on their economies.
The loss of income played a significant role in the indebtedness of Greece, which now
affects the whole euro zone and the European economy. Asymmetric financial shock,
symmetric economic shock(Barry Eichengreen, 2009) In case of Germany as we know the
situation of the automobile industry became worse than before as during the financial crisis
the demand for their high quality vehicles decreased. Thanks to Germanys fiscal stability
the government could support internal demand by the Wreck Premium program.(Anonymus, 2009)
As a solution Mr. Rna suggests that integration of members of the EMU needs to
deepen through common taxation, fiscal policy and a higher level resignation of
sovereignty. Years before this argument Gspr and Vrhegyi (1999) also stated that the
EMU lacks some of the most crucial tools and level of integration to handle shocks, like
high level of labour mobility and central budget transfers.
Both Palnkai (2004) and Krugman (2003) admit that according to traditional
economic theories the EU and the EMU cannot be considered as an optimum currency area,
mainly because of the limited mobility of labour, although migration among EU countries
is technically feasible, hence there are no country borders. The immobility of labour is
rather a result of language barriers and cultural differences among the member states, which
makes it difficult for individual countries to adjust to economic shocks. In addition,
movement of labour within the EU is also set back by unfavourable regulations and
housing policies in some countries. (Palnkai 2004)
The inefficiency of the housing market, the lack of clarity in the cross-border recognition of
professional qualifications and the limited portability of pension rights are all barriers to
geographical labour mobility in the EU. (Heinz-Warmedinger, 2006)
-
7/30/2019 Thesis Work Zsolt Szabo 2011
17/38
17
Compared to this, in the United States currency union this is just the opposite, as the
language and is the same in all states, cultural differences are not that significant and labour
force seems to react much more flexibly and rapidly to regional changes. The Americans
not only have the possibility to move, but also willing to move, creating equilibrium at
regional labour markets. (Bks, 1998)
Regarding the mobility of the other production factor, capital the EU can be
considered as perfectly mobile, since in the early 1990s member countries abolished all
restrictions on capital flows. The development of the IT sector has also contributed to more
efficient operation of capital markets.
If we go back to the criteria checklist of optimum currency areas in the second
chapter of this thesis, we can easily assess the properties of the EMU accordingly and
conclude whether it can be considered as an OCA or not. The following table helps in this
comparison.
Table 1
OCA Checklist and the EMU
Flexibility of factor markets Capital market: Yes
Labour market: No3
High degree of internal homogeneity No
Budget transfers No
About the flexibility of factor markets the previous give a comprehensive picture,
but I believe the degree of internal homogeneity and the issue of budget transfers need
some more clarification.
The degree of internal homogeneity can be described in many ways. And perhaps
this is the area where most experts and analysts have different opinions. Krugman (2003)
stated that the euro zone countries are similar in their manufacturing structure, which is
evidenced by the large volume of intra-industry trade. However he also admitted that there
3 Technically feasible, but language, cultural and other barriers are significant.
-
7/30/2019 Thesis Work Zsolt Szabo 2011
18/38
18
are important differences as well. For example northern countries are better endowed with
skilled and educated labour, while products that use low-skilled labour are likely to come
from southern Europe. It is also true that northern countries are more abundant in capital as
well. The newer members of the EU, who are waiting for the adoption of the euro, are also
more likely to have a development level of the southern countries. In this case their
accession to the euro zone can further increase differences within the monetary union.
The last point in the checklist is budget or fiscal transfers. This basically means
shifting a part of the fortune of better performing countries to those, which are performing
worse and have higher than optimal budget deficits. The no bail-out clause4 of the
Maastricht Treaty limits the possibility of such transfers to a very low amount. However as
we have seen in the current bail-out packages for Greece, there are some possibilities,
although they take long negotiations. Also as the example of Greece shows, the access to a
bail-out package does not the problems of the real economy, only delays bankruptcy.
As a the result of the above we can conclude that, despite the fact the accession
Economic and Monetary Union is only possible through the compliance with the
Maastricht criteria, the EMU does not fulfil the requirements of optimum currency areas.
However as the process of joining the monetary union was considered irreversible from the
beginning there is no elaborated way a country can return to its original currency and own
monetary policy making. Also, a step like this would have unpredictable effects on the euro
and financial markets and thus would not likely to be supported by any of the member
states. For this reason chances are that the euro zone will stay together, but it needs to
improve to be able to operate optimally as it was planned in the beginning.
4Article 104 b/1 of the Maastricht Treaty: The Community shall not be liable for or assume the commitmentsof central governments, regional, local or other public authorities, other bodies governed by public law, or
public undertakings of any Member State, without prejudice to mutual financial guarantees for the joint
execution of a specific project. A Member State shall not be liable for or assume the commitments of central
governments, regional, local or other public authorities, other bodies governed by public law or public
undertakings of another Member State, without prejudice to mutual financial guarantees for the joint
execution of a specific project.
-
7/30/2019 Thesis Work Zsolt Szabo 2011
19/38
19
4. Hungary and the Economic and Monetary Union
In the second chapter of the thesis I assessed the costs and benefits of joining an
optimal currency area. Whether we consider the EMU an OCA or not, the costs and
possible benefits of the accession will be similarto those of an optimum currency area, only
their extent will be different. Since the adoption of the euro will be compulsory for Hungary after it
fulfils the Maastricht convergence criteria, it is good to know what we can expect from giving up
our national currency, the forint and plan with economic policy accordingly. Alternatively, if policy
makers conclude that it is best to keep our own currency it is still possible deliberately not to fulfil
the criteriaas Sweden does.
It also has to be noted, that in itself the fact that the EMU does not fulfil all requirements of
optimum currency areas does not mean that Hungary cannot benefit from joining the euro zone. If
the similarities and the degree of integration reach a certain level it is beneficial for us to adopt the
euro. However it has to be added, that not only the nominal extent of gains and losses count. The
extremes of business cycles are also important; it is better and safer to have a slower but sustainable
economic growth, then having rapid expansion with overheated economy and dramatic collapse.
The level of integration and the applicability of the common monetary policy are crucial in this
respect.
In 2002, a study conducted by the Hungarian National Bank concluded that the monetary
policy of the Economic and Monetary Union is applicable to the Hungarian economy at least as
much as it is for the less developed members of the euro zone. As we see, today the less developed
countries, especially Greece faces huge crisis, which shows that their euro accession was too early,
and the strong common currency ruined their competitiveness within only a few years, or led to
unsustainable growth, which than made the economy collapse. This can be warning sign for
Hungary, showing the importance of level of integration at the point of accession and the timing of
the euro adoption.
The same study has also shown quantified data to interpret the aggregate effect of
Hungarys euro accession. The studys English title is Adopting the euro in Hungary: expected
costs, benefits and timing, and was edited by Attila Csajbk and gnes Csermely. This study
serves as the basis for the next paragraphs of my thesis.
-
7/30/2019 Thesis Work Zsolt Szabo 2011
20/38
20
4.1. The Benefits of joining the EMU
When we assess the benefits and costs of membership in the monetary union, first it
needs to be clarified what is the alternative to the accession, what do economic prospects
look like in case of keeping the own currency. In the above mentioned study the editors
related the costs and benefits to an alternative path of joining the European Union at a
relatively early stage (this was fulfilled in 2004), but keeping the own currency, monetary
and exchange rate policy. The study also assumed that despite the country refrained from
the accession to the monetary union, the continued convergence of inflation rate and
incomes towards the euro area.
The benefits of joining the EMU can be classified into three main categories, which
I have already indicated in the second part. These are the following:
reduction of transaction costs expansion of external trade reduction of real interest rates
The use of the national currency can be considered as an administrative burden,
which ties up part of the physical and human resources. These losses appear at a household
and firm level as well, since the cost of conversion of forint to euro (and vice versa) takes
form in commissions, bank fees and bid-ask spreads. According to estimates based on the
volume of trade of the forint on the foreign exchange market and the corresponding fees,
the reduction of transaction costs means a single (one time) 0.18-0.3 percentage point
increase in the level Hungarys gross domestic product.
Maintaining the national currency can have a negative effect on the volume ofexternal trade as well. The common currency makes prices more transparent and
comparable. Also, the risk of exchange rate fluctuation disappears. This motivates trade,
which in turn leads to further exchange of technology and know-how. Based on this
argument the adoption of the euro will lead to a 0.55-0.76 percentage pointincrease in the
rate of GDP growth in the long run.
-
7/30/2019 Thesis Work Zsolt Szabo 2011
21/38
21
The risk of exchange rate fluctuation is also included in the risk premium of
Hungarian securities (bonds for example). This extra interest compensates external
invertors for uncertainties regarding future exchange rates. The common currency will
remove this extra interest from nominal rates, which in turn causes real interest rates to be
lower. This not only makes financing cheaper, but the threat of devaluation caused by the
current account deficit will also be ceased for euro zone investors. This removes a major
restraint on investment growth, and accelerates the convergence of incomes to EU levels.
Analysts suggest that this change will raise the rate of GDP growth by 0.08-0.13percentage
point. According to the study the euro will have a positive effect on the financial
integration as well. As the exchange risk ceases domestic households will have the
possibility to broaden their investment portfolios with foreign assets from the euro zone.
The better diversification can reduce risks and the exposure to asymmetric shocks, leading
to more efficient portfolios. This can also increase the GDP growth rate on the long run by
an estimated 0.6-0.9 percentage point.
A further benefit of giving up the own currency is that by using the euro a small and
open economy, which is classified in the emerging market investment category can reduce
the likelihood of financial infections and speculative attacks against its currency. The use of
the own currency would lead to a greater fluctuation of capital flows, which can be harmful
for the business cycle as well.
4.2. The costs of joining the EMU
The quantifiable cost of giving up the own currency is the loss of income from
issuing the money. Of course Hungary will also receive a share of the seigniorage income
of the euro zone, but due to the rules of distribution of this income, the money received willbe less than the seigniorage earned if Hungary kept the forint. The share of the seigniorage
income is base on the countrys contribution to the capital of the European Central Bank.
The money that a country has to pay into the capital base of the ECB is calculated using a
key which reflects the respective countrys share in the total population and gross domestic
-
7/30/2019 Thesis Work Zsolt Szabo 2011
22/38
22
product of the EU. The lower seigniorage income causes a 0.17-0.23 percentage pointloss
to the annual GDP level.
Another type of cost will stem from abandoning the monetary autonomy, this cost,
however, is not really quantifiable and will be determined by the fluctuation of economiccycles after the accession to the euro zone. The fluctuations will be determined by the
extent of asymmetric shocks to which Hungary will be exposed. These shocks are rapid
changes in the economic environment that have a different affect on Hungary and the euro
zone. There are two ways of adjustment to these changes, namely the operation of
automatic stabilizers and active fiscal measures. In Hungary the role of automatic
stabilisers is minor, which is not exceptional within the less developed member states of the
euro zone. It should be noted that the EU prefers aggregate demand adjustment via
automatic stabilizers in contrast to fiscal measures. Since it cannot be measured or
quantified there is a big uncertainty behind the cost of stability loss, which needs to be
reckoned with.
Table 2
Effect of the short-term factors on
the level of GDP as percentage point of GDP
Reduction in transaction costs 0.180.30
Change in seigniorage revenue (-0.17)(-0.23)
Net effect 0.010.07
Source: Csajbk- Csermely (2002)
-
7/30/2019 Thesis Work Zsolt Szabo 2011
23/38
23
Table 3
Effect of long-term factors on
GDP growth as percentage points
Reduction in real interest rates 0.080.13
Expansion of external trade 0.550.76
Net effect 0.630.89
Source: Csajbk- Csermely (2002)
The cost-benefit comparison of joining the EMU can be summarized in the
following way. Although in the short run quantifiably benefits and costs cancel each other
out, on the longer term benefits arising are can significantly exceed the costs entailed. With
the common monetary policy the country loses a major device for keeping asymmetric
shocks at bay, but at the same time a potential source of asymmetric shocks disappears by
giving up the national currency (e.g.: financial infection and speculative attacks). (Csajbk
Csermely, 2002)
4.3. The timing of the accession
As the cost benefit analysis showed that benefits will significantly exceed costs
when Hungary joins the euro zone, the answer for the timing of the accession seems to be
obvious: the sooner the better. However it is not that simple.
The too rapid fulfilment of the nominal convergence criteria can lead to losses in
the real economy. The most problematic factors in this sense are the inflation and the
budget deficit. A too fast disinflationary and fiscal convergence can sacrifice too much of
the real growth of the economy. However it also has to be noted, that in the period between
the EU accession and the adoption of the euro a country can face a speculative inflow of
capital, if investors are on the opinion of an early euro accession. If investor confidence
falls for some reason, the speculative capital can be withdrawn from the country, causing a
-
7/30/2019 Thesis Work Zsolt Szabo 2011
24/38
24
rapid devaluation of the currency. The fluctuation of capital flows can cause extreme
volatility in the valuation of a nations currency. Since Hungarys is in this stage of the
integration, this also has to be taken into account in the convergence programme. A
credible programme can reduce fluctuations and stabilize the exchange rates, as
international experiences show that exchange rates tend to converge to the expected rate of
conversion as the date of entry approaches. (Csajbk Csermely, 2002)
As it can be seen on Figure 2 there were quite lot fluctuations in the EUR/HUF
exchange rate in the past years. Extremes of the volatility were reached during years of the
financial crisis in 2008 and 2009. In this period, due to the instability of the markets the
exchange rate shoot up from the all-time low (strong forint) 230 to the all time high (weak
forint) 310. This is a 35% change in only a few months. If we do not consider this period,
some volatility still remains, however it can be noted, that the exchange rate fluctuated
around 270 (+- 10%).
Figure 2
The EUR/HUF exchange rate
between 2004 and 2011
source: yahoo.finance.com
-
7/30/2019 Thesis Work Zsolt Szabo 2011
25/38
25
The governments commitment to an early accession to the euro zone is one of the
most important factors that make a disinflationary programme credible. The more
inflationary expectations start to sink after the announcement of the disinflationary path, the
easier it becomes to reduce inflation to the required level. Also it will take less time, which
means that the economy needs to suffer much lower losses. Hungary submitted its first
convergence programme in the spring of 2004, and since 2007 submits an updated
programme, which includes aims and completed measures.
As some experts say, Hungarys development level is too far be low the average of
the euro zone countries to join the EMU in the near future. According to Pter Rna the
Hungarian real economy is at about a level of 60% compared to the monetary union, while
the accession to the euro zone would be a mistake under 85-90%. According these
estimates and the current economic situation an accession before 2020 seems to be
unrealistic, if Hungarian governments are willing to wait until the economies development
reaches a certain level. (Frjes Judit, 2010) And it is worth waiting to an adequate level of
integration, because as we see in the previous chapter the net effect of the accession will
depend mainly on the long-term benefits and costs. As long-term costs/stability losses are
hardly quantifiable Hungary needs to make sure in advance, that its economy is ready for
the adoption of the euro by good policy making and by preventing a too early accession.
In the recent financial crisis many experts and analysts said that Hungary needs to
join the euro zone, because the introduction of the euro can solve the problems, but the
words of Jrgen Stark should always ring in our minds, when hearing about the straight
away accession to the monetary union: In short, unilateral euroisation is not a panacea. Its
benefits are uncertain, whereas the costs are real, and the risks serious. In particular, it should be
stressed that euroisation is not a quick-fix for structural problems or external pressures.
Admittedly, euroisation would provide some shelter against adverse winds coming from the
outside. (Jrgen Stark, 13 February 2008, Reykjavik)
-
7/30/2019 Thesis Work Zsolt Szabo 2011
26/38
26
4.4. Hungarys EMU maturity
In 2002, the Hungarian National Banks comprehensive analysis (Csajbk
Csermely, 2002) concluded that Hungarys accession to the Economic and Monetary Union
has significant net benefits, which implies it is worth to join the monetary union as soon as
possible. After Hungarys 2004 accession to the European Union, the government proposed
more possible dates for the introduction of the euro, which all turned out to be infeasible. In
the last few years, Hungarys euro accession seemed to be drifting away. Also, since 2006
the Hungarian National Banks Analysis of the Convergence Process has more and more
emphasis on the necessary conditions for the successful adoption of the euro. One of the
most important factors is fiscal consolidation; Hungary not only has to fulfil the formal
requirements for inflation and debt level of the Maastricht criteria, but also needs to create a
reasonable room for fiscal manoeuvring before the euro accession. (Hungarian National
Bank, 2010)
When assessing Hungarys maturity preparedness for joining the euro zone it seems
to be logical to start with comparing Hungarys performance to the Maastricht criteria.
Since the reference levels of the inflation and long-term interest rate are changing from year
to year it is necessary to highlight that the prevailing economic situation of the EU,
especially its members with the lowest inflation rates are determinant when assessing how
well Hungary is approaching the criteria. In the recent years of economic slowdown for
example the three members of the euro zone with the lowest inflation experienced
reduction in prices (negative inflation or deflation), which according to most of the
economists is far more dangerous than a moderate level inflation, because it can slow the
economy down even further. Also, at this point another weakness of the Maastricht criteria
can be discovered, namely that when it considers inflation as the measure of price stability,
it does not take into account that inflation can be negative as well, or turning this aroundconsiders negative inflation more desirable then zero inflation (perfect price stability).
The reference values for the Maastricht criteria are published by the European
Central Bank every two years. The last report was published in May, 2010. According this
convergence report the three countries are Portugal (-0.8%), Estonia (-0.7%) and Belgium
-
7/30/2019 Thesis Work Zsolt Szabo 2011
27/38
27
(-0.1%). The average inflation of these three is -0.5%, which means that the reference level
for inflation since May, 2010 is 1.0% (-0.5% + 1.5%). The reference value for long-term
interest rates (after similar calculation) is 6.0%. (European Central Bank, 2010)
Table 4
The Maastricht criteria and Hungary
Criteria Reference Level (2010) Hungary
Inflation rate 1.0% 3.6% *
Long-term interest rate 6.0% 7.6% *
Budget deficit to GDP 3.0% 3.2% **
Debt level to GDP 60.0% 76.1%*
Exchange rate stability ERM II No
source: European Central Bank, Hungarian National Bank, Ministry of National Economy
* - September, 2011
** - 2010
As it can be seen in Table 4 today Hungary fails to match any of the Maastricht
convergence criteria. Although Hungary is not a member of the ERM II (which will be
compulsory sooner or later), until February, 2008 the Hungarian National Bank let the
forint to fluctuate against the euro only within a certain fluctuation band. This was a
unilateral shadowing of ERM II (Allam, 2009). The centre of this band was at 282.36, with
the lower extreme of 240.01 and a higher extreme of 324.71. The EUR/HUF exchange rate
has stayed mostly within these rates even after February 26, 2008, when the Hungarian
National Bank revoked the fluctuation band.
As I have mentioned earlier the economic slowdown in some of the member states,
which resulted in deflation has effected that the reference value for inflation is 1.0%. As the
Hungarian National Bank states on its website (www.mnb.hu), that the medium term
inflation rate in Hungary is 3.0%, it can be concluded, that is not the goal of policy makers
to chase the Maastricht criteria at any cost. Additionally it is more likely that as the
economies recover prices will increase in those countries, which experienced deflation in
the recent years. This means that the reference value will increase to a more healthy value
-
7/30/2019 Thesis Work Zsolt Szabo 2011
28/38
28
as well. The average inflation target of the European Central Bank is below but close to
2%. (Jrgen Stark, 13 February 2008, Reykjavik)
The criteria for long-term interest rates, budget deficit to GDP and debt to GDP
have a common point. Strict fiscal policy can make these figures improve. Lowergovernment spending directly improves the budget deficit and debt level. Although on the
other hand it needs to be done properly. Suddenly cut government spending can have
negative effect on the GDP. If GDP fall, these figures get worse, even if the nominal
amount of deficit or debt does not change. While fiscal policy indirectly, monetary policy
directly has effect on long-term interest rates. To improve this figure, Hungary needs to
gain credibility in investors eyes, so that they are more willing to finance the country even
at lower interest levels.
By joining to the euro zone and giving up monetary autonomy Hungarys economic
structure will be more or less fixed. The threat of asymmetric shocks is caused by the
different sensitivity of countries to changes in the economic environment in different
industries. This different sensitivity stems from the structural differences among countries.
Since after the accession the only tool in individual economic policy making will be fiscal
measurements, Hungary should get to a high level of real convergence before the
introduction of the euro. In the narrow sense this means that wages catch up to EU levels
and the economic structure becomes similar to the EU. In the latter case it can be said, that
convergence is appropriate (although the level of development is low), but the adjustment
of wages is expected to be a very slow process.
The optimal operation of the EMU needs perfectly flexible markets, which can
stabilize changes in the economic environment. On the goods market this means price-
flexibility, while on the labour market a supply of labour force that adjusts to the
production conditions. The barriers to a flexible labour market are the high rate of long-
term unemployment, the inelastic education and low mobility. In the new member
countries, like Hungary, the mobility of labour is significantly lower than in the developed
countries. Until differences among regional unemployment rates dont reduce (indicating
low labour mobility within the same country), it is unrealistic to expect reduction between
different member states.
-
7/30/2019 Thesis Work Zsolt Szabo 2011
29/38
29
4.5. The experience of some other EMU members
In the previous parts of the thesis I assessed the possible consequences of Hungarys
euro zone accession from mainly a theoretical point of view. However before deciding
about, whether it is beneficial for us to join the EMU, it is good to take a look at the
experiences of some member states, which introduced to euro at an economic development
and integration level that is similar to Hungarys current situation. Perhaps, the most
obvious choice for this would be Slovakia, but they only joined the EMU a few years ago,
right before the financial crisis. The short timeframe and the exceptional world economic
situation could have a biasing effect on the conclusion about Slovakias euro experience.
However there are still some other states from South-Europe that can be used for this kind
of analysis.
According to Horvth and Szalai (2001) the way of integration of Greece, Ireland or
Spain can be a good starting point for Hungary, but they also highlighted that Hungary has
a different economic structure and environment than the previously mentioned countries.
The reason for still using their example is that the development level of these countries
was similar to Hungarys current situation. The authors concluded, that for the earliest
possible accession to the EMU the joining countrys government and national bank has to
co-operate advisedly, since both fiscal and monetary policy making is the most effective in
this way. In Greece, Spain, Portugal and Ireland this seemed to be working, as all countries
could reduce their inflation from high levels to acceptable values. In case of Greece this
meant to a reduction of price increase from almost 20% in 1991 by around 3% in 1999.
After the accession the EMU inflation rates were rising in these countries as a result
of the common monetary policy. This is the result of the previous wrong approach to
decrease inflation within a relatively short time. This wrong approach could be that instead
of strengthening confidence of investors and companies, they implemented restrictions
through contractionary fiscal policy, which led to a decrease in inflation through the
decrease in demand. After the introduction of the euro, the higher level inflation returned to
these countries.
-
7/30/2019 Thesis Work Zsolt Szabo 2011
30/38
30
While inflation and budget deficit can be reduced by one time measurements and
restrictions on spending, the progress of integration and the way towards the
implementation of the euro needs to be sustainable. Long-term interest rates indicate how
confident investors are, that the fiscal and monetary policies of a country lead to a
sustainable development path. The level of public debt is another key factor which
determines investor opinion and thus the interest rate. A high debt level increases the risk
of non-payment, which risk will appear in interest rates. In the beginning of the integration
process the risk premium of Spanish and Portuguese bonds was much higher than the
similar maturity date German bonds. After the 1995 ERM crisis this difference rapidly
decreased as the schedule for the creation of the Economic and Monetary Union was
finalized, and the fulfilment of the Maastricht criteria became the priority of Southern
countries as well. (Horvth Szalai, 2001).
Regarding budget deficit and debt level, the example of these countries show,
monetary discipline and strict fiscal policy making made it relatively easy to meet target
levels, or at least show a trend of approaching target at a high pace. After the EMU
accession, however it turned out that the Greek and Portuguese approach was somewhat
wrong. In these two countries budget deficit was decreased to a large extent by increasing
state incomes, while Spain implemented cut backs on the expenditures side. The latter
turned out to be the sustainable solution. (Horvth Szalai, 2001)
One of the major questions regarding the accession to the monetary union is the
exchange rate at which the countries original currency will be converted to the euro. In this
respect, the goal of previously joined countries was to prevent their currency to be
overvalued compared to the euro. This is a reasonable idea, because the overvalued
currency would worsen the countries competitiveness, lead to unemployment and
recession. Also it would set back integration to the western countries. As a preventive
measure Greece devaluated the drachmas by 10% before the accession. The exchange rates
of both the Portuguese escudos and the Spanish pesetas were nominally at around the final
conversion rate for 4-5 years before the accession and the volatility of fluctuations has
decreased continuously. (Horvth Szalai, 2001) For the future my only advice for
Hungary regarding exchange rate policy is to prevent joining with and overvalued currency,
-
7/30/2019 Thesis Work Zsolt Szabo 2011
31/38
31
as it would easily ruin the countrys competitiveness in the euro zone. (For individual
conversion rates of countries see Appendix 1.)
4.6. Should Hungary join or not?
As it could be seen in this chapter the gains of joining a properly functioning euro
zone would exceed costs on the long term. However, this picture of the ideal world is not
reality. Reality is, that the neither the European Union nor the Economic and Monetary
Union can be considered as optimum currency areas in their current form, which implies
that member countries risk the possibility of emerging asymmetric shocks that cannot be
handled easily. From this point of view, in my opinion it is best to stay out of the monetary
zone, and observe its development, even if it takes some tricks as for example in the case of
Sweden, which country stays out by deliberately not fulfilling the Maastricht criteria.
However Hungary is not yet at a point of development to ask itself the question whether it
should join the monetary union or not. The fact is that today Hungary is far from being able
to join the euro zone and the government and policy makers should concentrate on
developing a plan not to fulfil the nominal criteria of accession, but to get the real economy
behind the numbers start to converge to those of the more developed countries of Europe.
Even if it takes time, this is the sustainable way of improvement, and at the end, the
sustainable way is the only way to go. Furthermore this is not only the condition of joining
the Economic and Monetary Union but the own interest of the country for the future.
To answer the question given in the title of the thesis I have to say, that in my
opinion Hungary should NOT join the Economic and Monetary Union even if it was
(nominally) ready for the accession. The reason behind my argument as it turned out from
the previous pages, is that both sides, the EMU and Hungary fail to meet the necessaryrequirements for a flourishing future with a common currency; the EMU does not have the
properties an optimum currency area needs to have, thus cannot operate optimally, while
Hungary not only fails to meet the convergence criteria, but also lacks the necessary real
economic development level, which could serve as a good ground for using the common
currency.
-
7/30/2019 Thesis Work Zsolt Szabo 2011
32/38
32
5. Conclusion
At the end of my thesis work I shall assess and conclude the findings of the
previous pages. The main aim of the thesis was to assess the costs and benefits of
Hungarys accession to the Economic and Monetary union and to conclude whether
Hungary should join the euro zone or not in a form which is easily understandable for the
reader.
In the first part of the thesis I introduced the main theories about optimum currency
areas and assessed the possible benefits and certain costs of joining a monetary union.
Then, after taking a view on its history, I examined the Economic and Monetary Union and
reached the conclusion, that it cannot be considered as an optimum currency area for
different reasons. The main reason that I highlighted was that the necessary homogeneity of
member countries is missing, furthermore some of the mechanisms that can prevent the
economy from the consequences from asymmetric shocks does not work properly as well
(e.g.: labour mobility). However I also admitted that some competitive core countries of the
EMU can be considered as countries forming an optimum currency area, but this is not
enough to say that the monetary union as a whole was a good decision to be made.
In the second half of the thesis I compared Hungary to the Economic and MonetaryUnion, examined whether the country fulfils the Maastricht criteria and gave some
information about what kind of experiences similar countries had before and after joining
the monetary union in the past. I also assessed the numerical costs and benefits of joining
the EMU. As a conclusion to these I admitted that an adequately timed accessions benefits
can exceed its costs. However, based on theoretical material and the experiences of Greece,
Portugal and Spain I suggested that Hungary should wait with the adoption of the euro until
it gets closer to the economic development level of the core countries, to minimize risks of
the accession. Since currently Hungary does not fulfil the Maastricht criteria, and Europes
economy faces hard times the possible time for Hungarys accession to the monetary union
seems to be in the distant future. Even optimistic estimates say that the chances are minimal
for an accession before 2020, but as the euro itself is not a cure for diseases the timing of
the accession does not need to be compelling.
-
7/30/2019 Thesis Work Zsolt Szabo 2011
33/38
33
6. Appendices
Appendix 1 Fixed euro conversion rates
Country and Currency Conversion Rate
Belgium, Belgian francs (BEF) 40.3399
Germany, Deutsche mark (DEM) 1.95583
Estonia, Estonian kroon (EEK) 15.6466
Ireland, Irish pound (IEP) 0.787564
Greece, Greek drachmas (GRD) 340.750
Spain, Spanish pesetas (ESP) 166.386
Cyprus, Cyprus pound (CYP) 0.585274
France, French francs (FRF) 6.55957
Italy, Italian lire (ITL) 1936.27
Luxembourg, Luxembourg francs (LUF) 40.3399
Malta, Maltese lira (MTL) 0.4293
Netherlands, Dutch guilders (NLG) 2.20371
Austria, Austrian schilling (ATS) 13.7603
Portugal, Portuguese escudos (PTE) 200.482
Slovenia, Slovenian tolars (SIT) 239.640
Slovakia, Slovak koruna (SKK) 30.1260
Finland, Finnish markkas (FIM) 5.94573
source: European Central Bank
-
7/30/2019 Thesis Work Zsolt Szabo 2011
34/38
34
Appendix 2 Euro banknotes
-
7/30/2019 Thesis Work Zsolt Szabo 2011
35/38
35
source: European Central Bank
-
7/30/2019 Thesis Work Zsolt Szabo 2011
36/38
36
7. Bibliography and references
Allam, Miriam (2009) The adoption of the Euro in the New EU Member States:
Repercussions of the Financial Crisis, University of Pittsburgh, Archive ofEuropean Integration
http://aei.pitt.edu/12377/1/20090709111740_Art4_Eipascoop2009_01.pdf
accessed 30 October, 2011
Anonymus (2009)Hatalmas profitot rt el a nmet autipar llami segtsggel, hvg.hu,
http://hvg.hu/cegauto/20091231_nemet_autoipar
accessed 30 October, 2011
Bks, Gbor (1998) Optimlis valutavezetek, gazdasgi integrltsg s hasonlatossg:
az Eurpai Uni pldja.Kzgazdasgi Szemle, Vol. XLV., July-August 1998, pp.
709-739.
Csajbk, Attila Csermely, gnes (2002)Az eur hazai bevezetsnek vrhat hasznai,
kltsgei sidztse., Budapest, Magyar Nemzeti Bank
Eichengreen, Barry (2009) Was the euro a mistake?
http://www.voxeu.org/index.php?q=node/2815
accessed 30 October, 2011
European Central Bank (2010) Convergence Report May 2010, Frankfurt am Main,
European Central Bank
Frjes, Judit (2010)Rna Pter: Mire bevezetnnk az eurt, mr nem lesz
http://hvg.hu/velemeny/20100517_rona_adocsokkentes_euro_gazdasag
accessed 30 October, 2011
Gspr, PlVrhegyi, va (1999)Az eur bevezetsnek hatsai az EMU s
Magyarorszg gazdasgra,Kzgazdasgi Szemle, Vol. XLVI., June 1999, pp
548-563.
http://aei.pitt.edu/12377/1/20090709111740_Art4_Eipascoop2009_01.pdfhttp://hvg.hu/cegauto/20091231_nemet_autoiparhttp://www.voxeu.org/index.php?q=node/2815http://hvg.hu/velemeny/20100517_rona_adocsokkentes_euro_gazdasaghttp://hvg.hu/velemeny/20100517_rona_adocsokkentes_euro_gazdasaghttp://www.voxeu.org/index.php?q=node/2815http://hvg.hu/cegauto/20091231_nemet_autoiparhttp://aei.pitt.edu/12377/1/20090709111740_Art4_Eipascoop2009_01.pdf -
7/30/2019 Thesis Work Zsolt Szabo 2011
37/38
37
Heinz, F. F.Ward-Warmedinger, M. (2006) Cross-border labour mobility within an
enlarged EU, Frankfurt am Main, European Central Bank
Horvth, gnes Szalai, Zoltn (2001)A kevsb fejlett EU-tagorszgok
konvergencijnak tapasztalatai,Kzgazdasgi Szemle, Vol. XLVIII., July-August2001, pp. 640-658.
Hungarian National Bank (2010) Analysis of the convergence process from the point of
view of the financial crisis, Budapest, Magyar Nemzeti Bank
Kenen, P. B. (1969) The theory of optimum currency areas: an eclectic view, In R.A.
Mundell and A. Swoboda (eds)Monetary problems of International Economy,
Chicago, University of Chicago Press
Krugman, P. R.Obstfeld, M. (2003)International Economics., Boston, Pearson
Education, pp 604-632.
McKinnon, R. (1963) Optimum currency areas, American Economic Review, Vol 53.,
September 1963, pp. 717-725.
Mundell, R. A. (1961)A theory of Optimum Currency Areas, American Economic Review,
Vol. 51., September 1961, pp. 657-665
Palnkai, Tibor (2003)Az eurpai integrci gazdasgtana, Budapest, Aula Kiad,
Palnkai, Tibor (2004)Economics of enlarging European Union, Budapest, Akadmia
Kiad, pp. 101-149.
Palcz, va (2004)Az eur magyarorszgi bevezetshez vezet, trsadalmi s gazdasgi
szempontbl optimlis t jellemzirl, annak temezsrl, klns tekintettel a
nvekeds, az egyensly, a bevezetshez szksges konvergencia kvetelmnyek s
az llami szerepvllals mrtknek lehetsges alakulsrl, Budapest,
Pnzgyminisztrium
-
7/30/2019 Thesis Work Zsolt Szabo 2011
38/38
Rna, Pter (2011) Interview on ATVs programme, Egyenes beszd.
http://atv.hu/cikk/20110630_rona_peter
accessed 30 October, 2011
Stark, Jrgen (2008) The adoption of the euro: principles, procedures and criteria, speechat the Icelandic Chamber of Commerce, Reykjavik, 13 February 2008,
http://www.ecb.int/press/key/date/2008/html/sp080213.en.html
accessed 30 October, 2011
http://atv.hu/cikk/20110630_rona_peterhttp://www.ecb.int/press/key/date/2008/html/sp080213.en.htmlhttp://www.ecb.int/press/key/date/2008/html/sp080213.en.htmlhttp://atv.hu/cikk/20110630_rona_peter