The Czech Republic, Hungary, Poland and Slovakia are committed to joining the European Union. Accordingly, their macroeconomic policies need to put them on a credible path towards meeting the entry criteria at some point in the foreseeable future. In Discussion Paper no. 1195, Research Fellows William Branson and Jorge Braga de Macedo develop a framework for analysing and evaluating both macroeconomic policy and the development of policy-making institutions to put each of the four national economies on that path and keep them there as they move towards accession.
The authors recommend that, in their approach to external balance, the economies adopt a pre-pegging exchange rate regime, which essentially means no active nominal devaluation (no nominal devaluation aimed at real devaluation) as the country converges towards union membership. They also recommend that, in their approach to internal balance, countries adopt a multi-annual fiscal adjustment strategy. Both of these policy paths are designed to bring the economies to the point of accession along as smooth a convergence path as possible. On the basis of both the development of economic institutions and performance, their overall ranking is Czech Republic, Slovakia, Poland, Hungary.

Macroeconomic Policy in Central Europe
William H Branson and Jorge Braga de Macedo

Discussion Paper no. 1195, August 1995 (IM)