The Hungarian Monetary Policy Model
March 2011 marked the introduction of the Magyar Nemzeti Bank’s Monetary Policy Model (MPM), representing a paradigm shift in both macroeconomic projection and monetary policy decision support. In contrast to previous conditional projections, the MPM provides an endogenous definition of both the projected policy rate and the projected exchange rate. Given the forward-looking nature of the model, expectations of economic agents play a key role in the monetary transmission process; therefore, the future achievement of the inflation target is guaranteed by the projected path of the interest rate over the forecast horizon. In this paper, we discuss the underlying structure and logic behind the MPM, describe the key behavioural equations and examine how the channels of monetary transmission appear in the model. In addition, we present the empirical validation process in detail from calibration, through Bayesian estimation and discussion of the economic properties of the model to the historical projection exercise. Finally, we discuss the main challenges we faced during the first year of application.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Adolfson, Malin & Laséen, Stefan & Lindé, Jesper & Villani, Mattias, 2007.
"Evaluating An Estimated New Keynesian Small Open Economy Model,"
Working Paper Series
203, Sveriges Riksbank (Central Bank of Sweden).
- Adolfson, Malin & Laséen, Stefan & Lindé, Jesper & Villani, Mattias, 2008. "Evaluating an estimated new Keynesian small open economy model," Journal of Economic Dynamics and Control, Elsevier, vol. 32(8), pages 2690-2721, August.
- Adolfson, Malin & Laséen, Stefan & Lindé, Jesper & Villani, Mattias, 2007. "Evaluating An Estimated New Keynesian Small Open Economy Model," CEPR Discussion Papers 6027, C.E.P.R. Discussion Papers.
- Mazumder, Sandeep, 2012.
"Determinants of the Sacrifice Ratio: Evidence from OECD and non-OECD countries,"
106, Wake Forest University, Economics Department.
- Mazumder, Sandeep, 2014. "Determinants of the sacrifice ratio: Evidence from OECD and non-OECD countries," Economic Modelling, Elsevier, vol. 40(C), pages 117-135.
- Adina Popescu & Alina Carare, 2011. "Monetary Policy and Risk-Premium Shocks in Hungary: Results from a Large Bayesian VAR," IMF Working Papers 11/259, International Monetary Fund.
- Szilárd Benk & Zoltán M. Jakab & Mihály András Kovács & Balázs Párkányi & Zoltán Reppa & Gábor Vadas, 2006. "The Hungarian Quarterly Projection Model (NEM)," MNB Occasional Papers 2006/60, Magyar Nemzeti Bank (the central bank of Hungary).
- Laurence Ball, 1994.
"What Determines the Sacrifice Ratio?,"
in: Monetary Policy, pages 155-193
National Bureau of Economic Research, Inc.
- Balázs Krusper, 2012. "The role of external and country specific factors in Hungarian inflation developments," MNB Working Papers 2012/5, Magyar Nemzeti Bank (the central bank of Hungary).
- Zoltán M. Jakab & Balázs Világi, 2008. "An estimated DSGE model of the Hungarian economy," MNB Working Papers 2008/9, Magyar Nemzeti Bank (the central bank of Hungary).
- repec:fgv:epgrbe:v:62:n:2:a:3 is not listed on IDEAS
- Pellényi, Gábor, 2012.
"A monetáris politika hatása a magyar gazdaságra. Elemzés strukturális, dinamikus faktormodellel
[The sectoral effects of monetary policy in Hungary: a structural factor]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 263-284.
- Péter Gábriel, 2010. "Household inflation expectations and inflation dynamics," MNB Working Papers 2010/12, Magyar Nemzeti Bank (the central bank of Hungary).
When requesting a correction, please mention this item's handle: RePEc:mnb:wpaper:2013/1. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maja Bajcsy)
If references are entirely missing, you can add them using this form.