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The optimal rate of inflation and the inflation target: international experience and the Hungarian perspective

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  • Réka Juhász

Abstract

This article discusses the main factors considered in defining the country’s inflation target which was revised this year. Three key issues are covered: the theoretical and empirical literature dealing with the optimal level of inflation, international best practice and individual, country-specific factors that may justify deviation in any direction from best practice. The article finds that the 3% inflation target set by the MNB is consistent with all the three aspects reviewed and, consequently, contributes to the MNB achieving its primary statutory objective of price stability.

Suggested Citation

  • Réka Juhász, 2008. "The optimal rate of inflation and the inflation target: international experience and the Hungarian perspective," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), vol. 3(2), pages 30-37, September.
    • Handle: RePEc:mnb:bullet:v:3:y:2008:i:2:p:30-37
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    File URL: http://www.mnb.hu/letoltes/mnb-bull-2008-09-reka-juhasz-en.pdf
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    References listed on IDEAS

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    9. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
    10. Anne-Marie Brook & Özer Karagedikli & Dean Scrimgeour, 2002. "An optimal inflation target for New Zealand: lessons from the literature," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 65, September.
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    Cited by:

    1. Phiri, Andrew, 2013. "Inflation and Economic Growth in Zambia: A Threshold Autoregressive (TAR) Econometric Approach," MPRA Paper 52093, University Library of Munich, Germany.

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    More about this item

    Keywords

    monetary policy; optimal rate of inflation.;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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