Template-Type: ReDIF-Paper 1.0
Author-Name: Balázs Krusper
Author-X-Name-First: Balázs
Author-X-Name-Last: Krusper
Author-Email: krusperb@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank (central bank of Hungary)
Title: The role of external and country specific factors in Hungarian inflation developments
Abstract: 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.
Length: 30 pages
Creation-Date: 2012
File-URL: http://www.mnb.hu/letoltes/wp-2012-05.pdf
File-Format: Application/pdf
Number: 2012/5
Classification-JEL: C33, E31, E42, E58
Keywords: inflation dynamics, factor model

Handle: RePEc:mnb:wpaper:2012/5