Template-Type: ReDIF-Book 1.0
Editor-Name: Balázs Vonnák
Editor-Email: vonnakb@mnb.hu
Editor-Workplace-Name: Magyar Nemzeti Bank
Author-Name: Csilla Horváth
Author-Name: Zoltán M. Jakab
Author-Name: Péter Karádi
Author-Name: Gábor Kátay
Author-Name: Gergely Kiss
Author-Name: Judit Krekó
Author-Name: Anna Naszódi
Author-Name: Gábor Orbán
Author-Name: András Rezessy
Author-Name: Zoltán Szalai
Author-Name: Gábor Vadas
Author-Name: Viktor Várpalotai
Author-Name: Balázs Vonnák
Author-Name: Zoltán Wolf
Title: Monetary Transmission in Hungary
Provider-Name: Magyar Nemzeti Bank (the central bank of Hungary), Budapest
Abstract: The Hungarian Monetary Transmission Mechanism research project was expected to fill the gaps in our knowledge. Almost fifteen years after the beginning of the Hungarian transition to a market economy, we felt that the time has come to launch a comprehensive research project with the purpose of obtaining an understanding based on more solid econometric results. Our project was also motivated by the Monetary Transmission Network in the Eurosystem, which gave us the opportunity to compare the Hungarian transmission mechanism to that of the euro area. It took almost three years for the colleagues at the Bank's economics department to explore the most important areas of the transmission mechanism. The research faced several challenges. The data used for estimation are still not completely satisfactory. Moreover, the framework of monetary policy, as well as some structural features of the Hungarian economy have changed during the period under investigation. Moreover, the special characteristics of our economy required a focus somewhat different from what is usual in the literature. Due to the uneven information available regarding the various sectors and markets, it was clear from the beginning that some areas would have to receive only limited coverage, rendering the synthesis of individual results difficult. Despite these shortcomings, the empirical work presented in this volume allows us to gain a better understanding of the Hungarian monetary transmission mechanism and has thus served its stated objective well. The benefits of the project are threefold. First, it confirms our assumption about the primacy of the exchange rate channel in Hungary's small open economy. Second, there are some interesting results that may alter our thinking about how the monetary transmission works. For example, we obtained a refined and – at least compared to earlier beliefs – slightly different picture about the way consumption and investments react to monetary policy actions . Third, it brought to the fore important areas where our knowledge is far from being satisfactory. This recognition calls for further research in order to strengthen the theoretical underpinnings of our monetary policy actions. Such areas are, for example, the labour market and credit markets. We also need a deeper understanding of the factors at work determining the exchange rate. This volume collects the papers written by the project participants. The volume is structured as follows. Studies dealing with the first stages of the transmission mechanism, i.e. how the monetary policy actions are transmitted to financial markets and asset prices, are presented first. They are followed by papers estimating the macroeconomic effects of monetary policy and the behavior of aggregate demand. The last study in the volume tries to assess the potential consequences on the transmission mechanism of joining the eurozone.
Classification-JEL: E52; E58.
Keywords: monetary transmission, Hungary, interest rate pass-through, monetary policy shock, exchange rate smoothing, bank-lending, structural VAR, aggregate demand, investment behavior, euro.
Year: 2006
ISBN: 978-963-9383-1
File-URL: http://www.mnb.hu/letoltes/monetary-transmission-in-hungary.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:ecbook:2006