Is the devaluation of Hungarian forint a balsam or a placebo?

Lakner, Zoltán – Podruzsik, Szilárd

In the first part of this study we analysed the literature of developed countries and showed that there was no close relationship between exchange rate and food export. In the second part we examined the relationship between the HUF-Euro exchange rate and food export on the basis of date collected during 100 months between January 1996 and April 2004. Export by the Hungarian food industry displayed a strongly cyclic pattern. Regression analysis between the realistic-effective exchange rate of HUF and timed-export purged of its cyclic nature showed a significant but loose relationship between exchange rate and export during the period of planned, sliding devaluation. Following the period of sliding devaluation no interpretably relationship could be detected between exchange rate and export. This indicated that the authorities tended to increase exports frequently at “any price” in order to increase their proceeds. In the third part of this study we collected statistical data showing that the yield per unit land area of Hungarian agriculture is a half to a third of that of developed European countries. Furthermore the average export of Hungarian agricultural and food industrial products is in many cases a mere fraction of that of competing products from states possessing well-developed agriculture. Thus our problems are much more serious than that could be cured by devaluation, which would serve as a placebo rather than a balsam in our case.

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