What does monetary policy do in the inflation targeting system? Tibor Erdos's paper 'Exchange-rate policy and inflation targeting in Hungary'

• Authors: Kovacs Mihaly A.
• Languages of publication: HU

Abstracts

EN

The analysis, which appeared in the October issue, makes several critical observations on monetary policy, the system of inflation targeting, and so of Hungarian monetary policy in the last few years. This has inspired several objections to the article's main theses. The author of this contribution argues, as a modeling economist working on analysis of macroeconomic data in the institution making such policy, that Tibor Erdos' statements are not supported by the facts or empirical analyses of the Hungarian economy. The author's first purpose is to present briefly and factually what monetary has and has not done in the last six years. That calls for a summary of the literature on modern monetary theory and inflating targeting. Nor can he avoid responding to the way Tibor Erdos, in criticizing the inflation targeting, tries to argue in practice against the mainstream of present-day monetary economics. It is not that inflation targeting is the sole salutary monetary system for small open economies like Hungary's. It is necessary to take issue with Tibor Erdos' argument on a theoretical plane, for he seems to have a problem with the conceptual grounds for an independent bank of issue, from which follows modern monetary theory. According to modern economic theory, price stability can be attained only by breaking the rigidity of inflationary expectations. That calls for independent, credible central-bank policy, especially in the presence of an expansive budget.

Keywords

EN

BROKERAGE; INVESTMENT BANKING; NEW FIRMS AND STARTUPS; RATINGS AND RATINGS AGENCIES; VENTURE CAPITAL

Discipline

• ECONOMICS: ECONOMICS

• Publisher: Committee for Economic Sciences of the Hungarian Academy of Sciences
• Journal: Kozgazdasagi Szemle (Economic Review)
• Year: 2007
• Volume: 54
• Issue: 12
• Pages: 1103-1120
• Document type: ARTICLE

Contributors

author

Kovacs Mihaly A.

• Mihaly A. Kovacs, no address given, contact the journal editor

Identifiers

CEJSH db identifier

10HUAAAA078523