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The optimal rate of inflation and the inflation target: international experience and the Hungarian perspective

  • Réka Juhász
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    This article discusses the main factors considered in defining the country’s inflation target which was revised this year. Three key issues are covered: the theoretical and empirical literature dealing with the optimal level of inflation, international best practice and individual, country-specific factors that may justify deviation in any direction from best practice. The article finds that the 3% inflation target set by the MNB is consistent with all the three aspects reviewed and, consequently, contributes to the MNB achieving its primary statutory objective of price stability.

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    File URL: http://english.mnb.hu/Root/Dokumentumtar/ENMNB/Kiadvanyok/mnben_mnbszemle/mnben_szemle_cikkei/mnb_bull_2008_09_reka_juhasz_en.pdf
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    Article provided by Magyar Nemzeti Bank (the central bank of Hungary) in its journal MNB Bulletin.

    Volume (Year): 3 (2008)
    Issue (Month): 2 (September)
    Pages: 30-37

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    Handle: RePEc:mnb:bullet:v:3:y:2008:i:2:p:30-37
    Contact details of provider: Web page: http://www.mnb.hu/

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    1. William T. Dickens & Lorenz Goette & Erica L. Groshen & Steinar Holden & Julian Messina & Mark E. Schweitzer & Jarkko Turunen & Melanie E. Ward, 2007. "How wages change: micro evidence from the international wage flexibility project," Staff Reports 275, Federal Reserve Bank of New York.
    2. Ball, L. & Mankiw, N.G., 1992. "Asymmetric Price Adjustment and Economic Fluctuations," Harvard Institute of Economic Research Working Papers 1602, Harvard - Institute of Economic Research.
    3. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers 568, China Economics and Management Academy, Central University of Finance and Economics.
    4. Jeffery D. Amato & Stefan Gerlach, 2001. "Inflation Targeting in Emerging Market and Transition Economies: Lessons after a Decade," Working Papers 132001, Hong Kong Institute for Monetary Research.
    5. Michael Bruno & William Easterly, 1995. "Inflation Crises and Long-Run Growth," NBER Working Papers 5209, National Bureau of Economic Research, Inc.
    6. Richard C.K. Burdekin & Arthur T. Denzau & Manfred W. Keil & Thitithep Sitthiyot & Thomas D. Willett, . "When Does Inflation Hurt Economic Growth? Different Nonlinearities for Different Economies," Claremont Colleges Working Papers 2000-22, Claremont Colleges.
    7. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
    8. Anne-Marie Brook & Özer Karagedikli & Dean Scrimgeour, 2002. "An optimal inflation target for New Zealand: lessons from the literature," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 65, September.
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