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MPM – The Magyar Nemzeti Bank’s monetary policy model


Author Info

  • Ágnes Horváth

    (Magyar Nemzeti Bank (central bank of Hungary))

  • Csaba Köber

    (Magyar Nemzeti Bank (central bank of Hungary))

  • Katalin Szilágyi

    (Magyar Nemzeti Bank (central bank of Hungary))

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    March 2011 marked the introduction of the MNB’s Monetary Policy Model (MPM), representing a paradigm shift in both inflation forecasting and monetary policy decision support. In contrast to the previous conditional projections, the MPM offers an endogenous definition for both the policy rate and the exchange rate. Given the forward-looking nature of this model, expectations by economic agents play a key role in monetary transmission; therefore, instead of one-off interest rate measures, the achievement of inflation target is guaranteed by the entire interest rate path over the forecast horizon. In the following, we discuss the underlying structure and logic behind the MPM, as well as the functioning of key behavioural equations, while also examining how the channels of monetary transmission appear in the model. We also present our motivations regarding the model switch and review how developing and operating this new tool have changed our current processes.

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    Bibliographic Info

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

    Volume (Year): 6 (2011)
    Issue (Month): 2 (June)
    Pages: 18-24

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    Handle: RePEc:mnb:bullet:v:6:y:2011:i:2:p:18-24

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    Related research

    Keywords: forecasting; monetary policy; inflation targeting; macroeconomic model.;

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    Cited by:
    1. Kozmenko, Serhiy & Savchenko, Taras, 2013. "Development of an explicit rule of monetary policy for the economy of Ukraine," MPRA Paper 50793, University Library of Munich, Germany.


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