The countries that kept their own currency to fight inflation on their own terms lost that fight to the one that gave the power away. Slovakia, alone among the Visegrad four in surrendering monetary policy to the ECB in 2009, came through the 2022 inflation spike with lower inflation and better-anchored expectations than Poland, Hungary, or Czechia, all of whom retained the very independence that theory says should have protected them. The intuitive read of the current environment, that floating-currency economies can tailor rates to their own needs and therefore do better, is exactly backwards for small open economies inside Europe's gravitational field.
This matters beyond an academic curiosity about four Central European states. It is a live constraint for anyone pricing the sovereign debt, currency, or rate outlook of any non-euro European economy, from the Nordics to the UK. The lesson is that de jure monetary sovereignty and de facto monetary autonomy are not the same thing, and the market that treats a national central bank's independence as a genuine policy lever is mispricing the anchor.
The Natural Experiment the Visegrad Four Provide
The four Visegrad economies form an unusually clean comparison. They share the single market, they are wired into German and wider EU manufacturing supply chains as outsourced production hubs, and they are close enough culturally and politically that most of the usual confounders wash out. The single meaningful difference is the currency regime: Slovakia adopted the euro in 2009 and takes its policy rate from Frankfurt, while Poland, Hungary, and Czechia run their own currencies and their own central banks.
That is close to the controlled experiment macroeconomics almost never gets. On the standard textbook logic, the three floaters held two advantages during the 2022 shock. Their central banks could, and did, hike faster than a cautious ECB that must set one rate for nineteen divergent economies. And their currencies could depreciate against the euro, cushioning growth by making exports cheaper. Slovakia had neither lever. It waited on the ECB and it could not devalue its way to competitiveness.
Research from Rainer Martin and Piroska Nagy Mohácsi at the London School of Economics traces how the four fared. The floaters used both levers. Their policy rates rose ahead of the ECB's, and their currencies weakened against the euro. By the theory, that combination should have delivered lower inflation and firmer growth.
When the Levers Pulled the Wrong Way
It did not. Inflation ran higher in the three independent economies than in Slovakia. Government deficits and GDP growth in Poland and Czechia landed roughly where Slovakia's did, and Hungary managed the worst of both, larger deficits alongside slower growth. The country that gave up control got the better inflation result. The countries that kept control paid more for the same or worse macro outcomes.
The resolution is not that independence is worthless. It is that a small open economy sitting next to the ECB does not truly possess it. The ECB is not merely the central bank of the euro area; it is the de facto central bank of the whole continent. Its balance sheet dwarfs every other European monetary authority, and its decisions set the financial weather from Warsaw to Stockholm to London in the same way the Federal Reserve conditions global markets far beyond the dollar bloc.
That gravity has a mechanism, and the mechanism is confidence. When a small central bank tries to run policy genuinely at odds with the ECB, capital notices. A currency free to depreciate is also a currency free to be sold, and a depreciation that theory frames as an export subsidy is, to a bondholder or an importer, imported inflation and a signal that the local anchor is weaker than Frankfurt's. The very flexibility that was supposed to help becomes the channel through which inflation expectations come loose.
The study's most important finding is precisely that. Inflation expectations stayed far better anchored in Slovakia and the euro area than in the three floaters. Anchored expectations are the whole game in an inflation spike, because they determine whether a supply shock passes through into wages and pricing behavior or fades. Slovakia borrowed the ECB's credibility. The floaters had to manufacture their own, at higher rates, and still came up short.
The Counterargument Worth Taking Seriously
The cleanest objection is that this reads too much into one episode and one cluster of small, deeply EU-integrated economies. Hungary in particular carried fiscal and political baggage that would have unsettled its currency and its inflation expectations regardless of the monetary regime, and lumping it in with Poland and Czechia risks blaming the exchange-rate float for problems that were fiscal in origin. That is a fair caution, and it is the fact that could most plausibly weaken the thesis: if the floaters' worse outcomes trace mainly to idiosyncratic fiscal choices rather than to the currency regime itself, the anchor argument loses force.
But the expectations evidence is hard to explain away on fiscal grounds alone. Poland and Czechia are not fiscal outliers, and they still saw expectations drift more than Slovakia did. The common thread across all three floaters, distinct from Slovakia, is the currency, and the common outcome is a looser anchor. The mechanism does not require every floater to be Hungary; it only requires that operating outside the euro's credibility umbrella raises the cost of holding expectations in place. That is what the data show.
There is also a scope limit worth stating plainly. This is an argument about small open economies inside Europe's monetary orbit, not a general verdict on monetary independence. A large economy with a deep domestic market and its own credible history, the UK being the obvious candidate, sits in a different category, closer to a satellite with its own gravity than a captured moon. The Visegrad result travels best to the smallest, most trade-dependent non-euro economies, and it should be applied to larger ones only with care.
Where the Read Gets Tested Next
The implication for the current inflation environment is direct. Non-euro European economies that markets assume can simply out-hike or devalue their way to a better inflation outcome are more constrained than the assumption allows. Sometimes a floating currency that theory frames as a shock absorber behaves instead as the transmission belt for imported inflation and drifting expectations, and the 2022 episode is a clean case of that pattern rather than a law that holds everywhere.
The observable that would confirm or break this read is the behavior of survey and market-based inflation expectations in the non-euro European economies relative to the euro area through the current cycle. If expectations in the floaters again drift wider than Slovakia's and the euro area's even as their central banks hold rates above the ECB's, the anchor thesis holds and the higher policy rates are buying less than they appear to. If instead the independent central banks manage to keep expectations tethered while running their own rate path, the case for genuine autonomy revives. Until that divergence resolves, the cleaner reading is that for a small open economy on Europe's periphery, being inside the euro's anchor beats being outside it, even at the cost of the policy lever.
