Consequences of global imbalance corrections for Hungary
AbstractThere are numerous signs of the emergence of global imbalances in world economy. This is reflected by the fact that of the developed countries the USA is producing a substantial, historically unprecedented magnitude of current account deficit vis-a-vis the current account surplus of a well-defined group of mainly emerging countries and of some developed countries. This is probably not an optimal situation, and in the course of solving this problem there is the question of what impacts the Hungarian economy may be exposed to and what steps Hungarian monetary policy can take. In examining the various scenarios of global adjustment, it is important to distinguish between an adjustment originating in Asia or in the USA. The former stimulates the Hungarian economy, while the latter temporarily hinders the Hungarian economy. A correction triggered by the markets has stronger output consequences for the Hungarian economy, than that of a restrictive fiscal policy in the USA. Hungarian monetary policy has an effect on whether output or inflation will become more volatile. Hungarian monetary policy tracking the ECB involves higher fluctuations in inflation and lower changes in GDP, whereas the situation is just the opposite in case of independent policies. If the exchange rate of the forint weakens due to a decline in global risk appetite, this would initially result in growing inflation, although over the longer term even lower GDP and inflation cannot be ruled out either.
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Bibliographic InfoArticle provided by Magyar Nemzeti Bank (the central bank of Hungary) in its journal MNB Bulletin.
Volume (Year): 1 (2006)
Issue (Month): 2 (December)
global imbalance; current account adjustment; forcasting; simulation.;
Find related papers by JEL classification:
- E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
- F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
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