Implementing Monetary Policy in Hungary Under Flexible Inflation Targeting

Ábel, István and Pierre, L. Siklos (2024) Implementing Monetary Policy in Hungary Under Flexible Inflation Targeting. FINANCIAL AND ECONOMIC REVIEW, 23 (4). pp. 153-176. ISSN 2415-9271

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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.

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