Advanced Search
MyIDEAS: Login to save this article or follow this journal

Considerations for setting the medium-term inflation target

Contents:

Author Info

  • András Rezessy

    ()
    (Magyar Nemzeti Bank (central bank of Hungary))

Abstract

The medium-term inflation target set in summer 2005 and taking effect in January 2007 brings fundamental changes in the Hungarian inflation targeting mechanism. Whereas formerly the government and the central bank used to set a new inflation target each year, a 3-percent medium-term target will enter into effect from the above date onwards. The transition to the new mechanism was not self-evident, as both the former and the new regimes have their specific drawbacks and benefits. This article discusses these issues, arguing that the advantages of the new regime are far more important than its drawbacks and exceed the benefits of the old regime. In the current state of the Hungarian economy, a 3-percent inflation target can be deemed optimal on the medium term. The reason why it is slightly higher than the inflation targets of the countries with advanced economies is the catching-up nature of the Hungarian economy. The Hungarian inflation target is reviewed every three years, since the optimal level of inflation may change, and will probably decrease in Hungary over time. Another important date, when the inflation target will again be reviewed, will be Hungary’s prospective entry into the common European exchange rate mechanism (ERM-II). The article also explains that the inflation target has been defined as a point target, which, given the situation of Hungary, is more favourable than a target band, which is employed by many other countries.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://english.mnb.hu/Root/Dokumentumtar/ENMNB/Kiadvanyok/mnben_mnbszemle/mnben_MNB_Bulletin_December_2006/mnbsz_200612_rezessy_en.pdf
Download Restriction: no

Bibliographic Info

Article provided by Magyar Nemzeti Bank (the central bank of Hungary) in its journal MNB Bulletin.

Volume (Year): 1 (2006)
Issue (Month): 2 (December)
Pages: 35-40

as in new window
Handle: RePEc:mnb:bullet:v:1:y:2006:i:2:p:35-40

Contact details of provider:
Web page: http://www.mnb.hu/
More information through EDIRC

Related research

Keywords: Monetary policy; central bank policies; inflation targeting.;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Svensson, Lars E O, 1999. "How Should Monetary Policy Be Conducted In An Era Of Price Stability?," CEPR Discussion Papers 2342, C.E.P.R. Discussion Papers.
  2. Frederic S. Mishkin & Adam S. Posen, 1997. "Inflation targeting: lessons from four countries," Economic Policy Review, Federal Reserve Bank of New York, issue Aug, pages 9-110.
  3. Gergely Kiss & Judit Krekó, 2004. "Optimal Rate of Inflation in Hungary," MNB Background Studies (discontinued) 2004/1, Magyar Nemzeti Bank (the central bank of Hungary).
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:mnb:bullet:v:1:y:2006:i:2:p:35-40. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maja Bajcsy).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.