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The role of external and country specific factors in Hungarian inflation developments


  • Balázs Krusper

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


Recent literature suggests that the co-movement of inflation is rather strong across countries. We use a factor model to asses this co-movement within the EU, while we differentiate between common (EU) and regional (CEE) effects. We find that price dynamics in Western European countries share a common pattern, while CEE countries can be divided into subgroups according to their inflation history. Results indicate that the monetary policy regime is a very important source of the difference among CEE countries. This method also allows us to examine how external and country-specific components contributed to the Hungarian inflation. We find that Hungary, similar to other countries in the region, experienced a disinflation period before the EU accession. However, country specific components (e.g. VAT changes or monetary policy) also played an important role.

Suggested Citation

  • Balázs Krusper, 2012. "The role of external and country specific factors in Hungarian inflation developments," MNB Working Papers 2012/5, Magyar Nemzeti Bank (Central Bank of Hungary).
  • Handle: RePEc:mnb:wpaper:2012/5

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    References listed on IDEAS

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    Cited by:

    1. Katalin Szilágyi & Dániel Baksa & Jaromir Benes & Ágnes Horváth & Csaba Köber & Gábor D. Soós, 2013. "The Hungarian Monetary Policy Model," MNB Working Papers 2013/1, Magyar Nemzeti Bank (Central Bank of Hungary).
    2. repec:prg:jnlpep:v:preprint:id:640:p:1-18 is not listed on IDEAS
    3. Aleksandra Halka & Grzegorz Szafrański, 2014. "What common factors are driving inflation in CEE countries?," EcoMod2014 6977, EcoMod.

    More about this item


    inflation dynamics; factor model;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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