Debate on the Pros and Cons of a Weak Currency as a Policy Tool. CURRENCY DEVALUATION AND HUNGARY’S ACCESSION TO THE EUROZONE
Debate on the Pros and Cons of a Weak Currency as a Policy Tool. CURRENCY DEVALUATION AND HUNGARY’S ACCESSION TO THE EUROZONE

Summary/Abstract: The question of whether currency devaluation could or should be used as a tool to improve the competitiveness of the Hungarian economy crops up in public policy discussions in Hungary from time to time. In a broader context, the same issue also arises when considering whether an eventual accession to the eurozone might overly restrict Hungary’s leeway in the domain of monetary policy. The common European currency zone, whose foundations were laid at Maastricht, is commonly criticised on several fronts, namely: the negative effects of the uniform interest rate1 on the sub-optimal currency zone2; the impossibility of a Keynesian counter-cyclical economic policy; and that it eliminates the possibility of using devaluation to increase competitiveness.

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