Template-Type: ReDIF-Paper 1.0
Author-Name: Katalin Szilágyi
Author-X-Name-First: Katalin
Author-X-Name-Last: Szilágyi
Author-Email: szilagyik@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank (central bank of Hungary)
Author-Name: Dániel Baksa
Author-X-Name-First: Dániel
Author-X-Name-Last: Baksa
Author-Email: baksad@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank (central bank of Hungary)
Author-Name: Jaromir Benes
Author-X-Name-First: Jaromir
Author-X-Name-Last: Benes
Author-Email: jbenes@imf.org
Author-Workplace-Name: International Monetary Fund
Author-Name: Ágnes Horváth
Author-X-Name-First: Ágnes
Author-X-Name-Last: Horváth
Author-Email: horvatha@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank (central bank of Hungary)
Author-Name: Csaba Köber
Author-X-Name-First: Csaba
Author-X-Name-Last: Köber
Author-Email: kobercs@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank (central bank of Hungary)
Author-Name: Gábor D. Soós
Author-X-Name-First: Gábor D.
Author-X-Name-Last: Soós
Author-Email: soosg@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank (central bank of Hungary)
Title: The Hungarian Monetary Policy Model
Abstract: 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.
Length: 56 pages
Creation-Date: 2013
File-URL: http://www.mnb.hu/letoltes/wp-2013-01.pdf
File-Format: Application/pdf
Number: 2013/1
Classification-JEL: C51, E17, E52, E58
Keywords: model projection, simulation, central banking, monetary policy
Handle: RePEc:mnb:wpaper:2013/1