Exchange-rate policy and inflation targeting in Hungary

• Authors: Erdos Tibor
• Languages of publication: HU

Abstracts

EN

The inflation targeting system applied in Hungary since 2001 relies on monetary policy to ensure that the consumer price level remains stable in the medium and long term, or at most rises very slowly, by which a rise of approximately 2 per cent a year is to be understood. Alternatively, if the monetary authority has to reckon with existing rapid inflation, the aim must be a considerable reduction in the inflation rate year by year. If monetary policy has already succeeded in bringing down inflation, the low rate must be permanently secured. However, it is not certain that preference in monetary policy should go to inflation targeting under all circumstances. Such a policy has a favorable effect only if two substantial preconditions apply: public finances are near equilibrium and nominal wages regularly adjusted to the GDP growth rate. If these preconditions are lacking, inflation targeting may have harmful effects too: currency overvaluation, excess of domestic utilization over GNP, increases in internal and external debt, decreasing rates of savings and investment, and lower economic growth potential. The author examines how to develop economic and within that monetary policy so that inflation targeting may be efficiently applied.

Keywords

EN

ANALYSIS OF FISCAL AND MONETARY POLICY; CENTRAL BANKS AND THEIR POLICIES; CURRENT ACCOUNT ADJUSTMENT; EXCHANGE-RATE POLICY; FOREIGN EXCHANGE; INCOMES POLICY; INFLATION; PRICE POLICY; SHORT-TERM CAPITAL MOVEMENTS

Discipline

• ECONOMICS: ECONOMICS

• Publisher: Committee for Economic Sciences of the Hungarian Academy of Sciences
• Journal: Kozgazdasagi Szemle (Economic Review)
• Year: 2007
• Volume: 54
• Issue: 10
• Pages: 853-875
• Document type: ARTICLE

Contributors

author

Erdos Tibor

• Tibor Erdos, no address given, contact the journal editor

Identifiers

CEJSH db identifier

10HUAAAA078511