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Capital flows in a transitional economy and the sterilization dilemma: The hungarian experience, 1992-97

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  • Pierre L. Siklos

Abstract

This paper evaluates Hungary's dilemma with sterilization in the context of the record of countries elsewhere that have experienced similar capital inflow episodes, e.g., Latin America and Asia. The study focuses on the short-run impact of sterilization on monetary policy. The empirical results indicate that sterilized interventions by the National Bank of Hungary (NBH) did not neutralize capital inflows until possibly the middle of 1995, following a change in government and, more significantly, a change in exchange rate regimes. Indeed, it appears that monetary policy was overly restrictive and that, for a time, the NBH overcompensated for the inflows of capital.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/13841280008523411
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Journal of Economic Policy Reform.

Volume (Year): 3 (2000)
Issue (Month): 4 ()
Pages: 373-392

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Handle: RePEc:taf:jpolrf:v:3:y:2000:i:4:p:373-392

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References

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  1. Obstfeld, Maurice, 1983. "Exchange rates, inflation, and the sterilization problem: Germany, 1975-1981," European Economic Review, Elsevier, vol. 21(1-2), pages 161-189.
  2. Jang-Yung Lee, 1996. "Implications of a Surge in Capital Inflows," IMF Working Papers 96/53, International Monetary Fund.
  3. Anonymous, 1994. "Monetary Policy Statement, December 1994," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 57, December.
  4. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
  5. Guillermo A. Calvo, 1991. "The Perils of Sterilization," IMF Staff Papers, Palgrave Macmillan, vol. 38(4), pages 921-926, December.
  6. Reinhart, Carmen & Calvo, Guillermo & Vegh, Carlos, 1994. "Targeting the real exchange rate: Theory and evidence," MPRA Paper 13412, University Library of Munich, Germany.
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Cited by:
  1. Filardo , Andrew J. & Siklos , Pierre L., 2013. "Prolonged reserves accumulation, credit booms, asset prices and monetary policy in Asia," BOFIT Discussion Papers 5/2013, Bank of Finland, Institute for Economies in Transition.
  2. Ouyang, Alice Y. & Rajan, Ramkishen S. & Willett, Thomas D., 2010. "China as a reserve sink: The evidence from offset and sterilization coefficients," Journal of International Money and Finance, Elsevier, vol. 29(5), pages 951-972, September.
  3. Waheed, Muhammad, 2010. "Foreign exchange intervention and sterilization: an investigation of State Bank of Pakistan’s Reaction Function," MPRA Paper 33161, University Library of Munich, Germany.
  4. Siklos, Pierre L. & Abel, Istvan, 2002. "Is Hungary ready for inflation targeting?," Economic Systems, Elsevier, vol. 26(4), pages 309-333, December.
  5. Khemraj, Tarron & Pasha, Sukrishnalall, 2011. "Monetary sterilization and dual nominal anchors: some Caribbean examples," MPRA Paper 34503, University Library of Munich, Germany.

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