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External and Domestic Drivers of Inflation: The Case Study of Hungary

Author

Listed:
  • Erzsebet Eva Nagy

    (Central Bank of Hungary)

  • Veronika Tengely

    (Central Bank of Hungary)

Abstract

Subdued global economic activity, declining energy and commodity prices, the appearance of new technological innovations and inflation expectations anchored at historically low levels around the world were all factors that have tended to result in declining inflation rates at the global level since 2013. The relationship between globalization and inflation is a popular research topic among economists. According to the majority of the body of literature, globalization’s and external factors’ influence on national inflation rates increased in recent years. In this paper we investigate, how external and domestic drivers affect the Hungarian inflation. Hungary is an interesting case study, since openness of the country grew significantly, thus Hungary became one of the most open economy in the EU. The Hungarian experience can thus be interesting for countries with an increasing trend of openness. Using several statistical methods, we examined and analyzed the impact of external and domestic drivers of the Hungarian inflation, and how these external factors varied in time and how their effect on the domestic inflation has changed. Our results show, that the role of external factors in domestic inflation developments strengthened in the past period, and especially after 2012, the changes in inflation in Hungary were mainly influenced by external effects.

Suggested Citation

  • Erzsebet Eva Nagy & Veronika Tengely, 2018. "External and Domestic Drivers of Inflation: The Case Study of Hungary," Russian Journal of Money and Finance, Bank of Russia, vol. 77(3), pages 49-64, September.
    • Handle: RePEc:bkr:journl:v:77:y:2018:i:3:p:49-64
    DOI: 10.31477/rjmf.201803.49
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    Citations

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    Cited by:

    1. Combes, Jean-Louis & Lesuisse, Pierre, 2022. "Inflation and unemployment, new insights during the EMU accession," International Economics, Elsevier, vol. 172(C), pages 124-142.
    2. Lahlou, Kamal & Bennouna , Hicham, 2022. "Contributions des facteurs domestiques et externes à la dynamique de l’inflation au Maroc," Document de travail 2022-1, Bank Al-Maghrib, Département de la Recherche.
    3. György Matolcsy & Márton Nagy & Dániel Palotai & Barnabás Virág, 2020. "Inflation in the Digital Age: Inflation Measurement and Bias in the 21st Century," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 19(1), pages 5-36.

    More about this item

    Keywords

    external factors; globalization; inflation; Phillips curve; principal components; SVAR models;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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