Supply shocks drive inflation in Hungary, demand shocks dominate in Poland.
The article examines what causes changes in prices and economic output in Poland and Hungary as they prepare to join the European Union. By using a model that considers factors like oil prices, supply, demand, and monetary issues, the researchers found that supply shocks affect prices in Hungary, while demand shocks are more important in Poland. In Hungary, monetary issues impact output in the short term, showing a lack of flexibility. In Poland, real demand changes affect output in the short term, with monetary issues being less significant. The study suggests that a large part of inflation in these countries is due to demand-driven factors. These findings have implications for how these countries should approach EU membership.