Fighting Inflation within the Monetary Union and Outside: The Case of the Visegrad 4

Reiner Martin and Piroska Nagy Mohacsi ()
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Piroska Nagy Mohacsi: London School of Economics and Political Science (LSE)

Financial and Economic Review, 2024, vol. 23, issue 4, 102-119

Abstract: The post-pandemic inflation surge tested monetary policy frameworks around the world. It was a particular test for the four Visegrad countries (V4) in Central-Eastern Europe, which provided a "natural experiment" to examine monetary policy outcomes under two different monetary regimes. With broadly similar economic characteristics, Slovakia was already in the Economic and Monetary Union (EMU) before the post-pandemic inflation hit, whereas the other three countries (Czechia, Hungary and Poland) were not. What was the inflation performance of the V4 countries under the two different regimes? What does this imply for the cost/benefit analysis of euro adoption for countries which are still outside the euro area? We find that EMU membership was beneficial both during "normal times" as the benefits of monetary sovereignty for small, open, integrated economies faded away, and particularly helpful during crisis times.

Keywords: Inflation; monetary policy; EMU; ECB; euro area; Central-Eastern Europe (search for similar items in EconPapers)
JEL-codes: E02 E31 E42 E52 E58 F02 F31 (search for similar items in EconPapers)
Date: 2024
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