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Monetary Impacts and Overshooting of Agricultural Prices in a Transition Economy: The Case of Hungary

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  • Bakucs, Lajos Zoltan
  • Ferto, Imre

Abstract

This article examines the impacts of monetary policy on agricultural prices in the Hungarian economy using time series analysis. The empirical results indicate that agricultural prices adjust faster to monetary shocks than industrial prices do, affecting relative agricultural prices in the short run, but strict long-run money neutrality does not hold. We also find that the exchange rate as a flexible sector variable, adjusts faster to temporary shocks than the sticky, industrial prices. This implies that in a case of monetary shocks the agricultural sector associated with flexible changes bears the burden of adjustment vis-à-vis the sectors with sticky changes. These macroeconomic effects are reflected in real agricultural price volatility and the agricultural sector by reducing the financial viability of the farmers.

Suggested Citation

  • Bakucs, Lajos Zoltan & Ferto, Imre, 2009. "Monetary Impacts and Overshooting of Agricultural Prices in a Transition Economy: The Case of Hungary," 2009 Conference, August 16-22, 2009, Beijing, China 51798, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae09:51798
    DOI: 10.22004/ag.econ.51798
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