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Implementing Monetary Policy in Hungary Under Flexible Inflation Targeting

Author

Listed:
  • Istvan Abel

    (Budapest Business University)

  • Pierre L. Siklos

    (Wilfrid Laurier University, Balsillie School of International Affairs)

Abstract

Stabilising properties have always been an important aspect of monetary policy implementation, albeit with due recognition of the economic environment. We develop a simple theoretical model to evaluate the main elements in the choice of policy strategy aimed at inflation control. While the analytical framework is useful to assess different monetary policy frameworks, our focus is the flexible inflation targeting framework that provides a role for exchange rate fluctuations. Empirical evidence, relying on Taylor rules, suggests that monetary policy has been practiced with considerable flexibility in Hungary and has contributed to business cycle stabilisation.

Suggested Citation

  • Istvan Abel & Pierre L. Siklos, 2024. "Implementing Monetary Policy in Hungary Under Flexible Inflation Targeting," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 23(4), pages 153-176.
    • Handle: RePEc:mnb:finrev:v:23:y:2024:i:4:p:153-176
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    References listed on IDEAS

    as
    1. Henry C. Simons, 1936. "Rules versus Authorities in Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 44(1), pages 1-1.
    2. Carlin, Wendy & Soskice, David, 2014. "Macroeconomics: Institutions, Instability, and the Financial System," OUP Catalogue, Oxford University Press, number 9780199655793.
    3. François Blondeau & Christophe Planas & Alessandro Rossi, 2021. "Output Gap Estimation Using the European Union's Commonly Agreed Methodology Vade Mecum & Manual for the EUCAM Software," European Economy - Discussion Papers 148, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    flexible inflation targeting; monetary policy; Taylor rule; stabilisation policy;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • 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
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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