Author information:
András Balogh https://orcid.org/0009-0000-5580-8929: Magyar Nemzeti Bank, Senior Economic Analyst. E-mail: baloghan@mnb.hu
Zsolt Kuti https://orcid.org/0009-0003-6219-0137: Magyar Nemzeti Bank, Executive Director. E-mail: kutizs@mnb.hu
Annamária Sipos-Madarász https://orcid.org/0009-0006-6581-7152: Magyar Nemzeti Bank, Economic Analyst. E-mail: madaraszan@mnb.hu
Abstract:
The role of central banks in shaping economic processes has been a key issue since their existence. This has typically always been related to the challenges faced by monetary policy decision makers at the time, and from the 2000s onwards even more so in the decade in question. In our essay, we focus primarily on the challenges facing Hungarian monetary policy, briefly outlining the developments in the past decades and elaborating on the challenges ahead. In the longer term, as a small, open economy, Hungary must respond to the prevailing and often interconnected international megatrends of the decade, assessing which of these developments represent challenges and which of these provide opportunities for the Magyar Nemzeti Bank to solve the challenges. In an era of geopolitical change, the green transition, demographic change, high debt levels and digitalisation, one thing is certain: central banks cannot lose sight of their primary objective of ensuring price stability.
Cite as (APA):
Balogh, A., Kuti, Z., & Sipos-Madarász, A. (2024). The Recent History of Hungarian Monetary Policy and Future Challenges for Central Banks. Financial and Economic Review, 23(2), 5–30. https://doi.org/10.33893/FER.23.2.5
Column:
Our Vision (Essay)
Journal of Economic Literature (JEL) codes:
E31, E43, E52
Keywords:
monetary policy, interest rate cutting cycle, price stability, inflation, financial stability, megatrends, geopolitics, green transition, demography, competitiveness
References:
Ábel, I. – Csortos, O. – Lehmann, K. – Madarász, A. – Szalai, Z. (2014): Inflation targeting in the light of lessons from the financial crisis. Financial and Economic Review, 13(4): 35–56. https://en-hitelintezetiszemle.mnb.hu/letoltes/2-abel-en.pdf
Acemoglu, D. – Restrepo, P. (2017): Robots and Jobs: Evidence from US Labor Markets. NBER Working Paper 23285, National Bureau of Economic Research. https://doi.org/10.3386/w23285
Adrian, T. – Gaspar, V. – Gourinchas, P.-O. (2024): The Fiscal and Financial Risks of a High-Debt, Slow-Growth World. IMF Blog, March 28. https://www.imf.org/en/Blogs/Articles/2024/03/28/the-fiscal-and-financial-risks-of-a-high-debt-slow-growth-world. Downloaded: 25 April 2024.
Afrouzi, H. – Halac, M. – Rogoff, K.S. – Yared, P. (2024): Changing central bank pressures and inflation. Brookings Papers on Economic Activity. BPEA Conference Draft, March 28–29. https://doi.org/10.3386/w32308
Aguila, N. – Wullweber, J. (2024): Greener and cheaper: green monetary policy in the era of inflation and high interest rates. Eurasian Economic Review, 14: 39–60. https://doi.org/10.1007/s40822-024-00266-y
Albagli, E. – Grigoli, F. – Luttini, E. (2022): Inflation Expectations and the Supply Chain. IMF Working Paper No. 2022/161, International Monetary Fund. https://doi.org/10.5089/9798400214752.001
Aldasoro, I. – Doerr, S. – Gambacorta, L. – Rees, D. (2024): The impact of artificial intelligence on output and inflation. BIS Working Paper No 1179, April. https://www.bis.org/publ/work1179.htm
Amatyakul, P. – Igan, D. – Lombardi, M.J. (2024): Sectoral price dynamics in the last mile of post-Covid-19 disinflation. BIS Quarterly Review, 2024(March): 45–57. https://www.bis.org/publ/qtrpdf/r_qt2403d.pdf
Bacchiocchi, A. – Ille, S. – Giombini, G. (2024): The effects of a green monetary policy on firms financing cost. Journal of Economic Interaction and Coordination, 10 January. https://doi.org/10.1007/s11403-023-00400-0
Balatoni, A. – Soós, G.D. (2023): Changing world, changing impact – The macroeconomic impact of the exchange rate. Feature article, Magyar Nemzeti Bank. https://www.mnb.hu/letoltes/changing-world-changing-impact-the-macroeconomic-impact-of-the-exchange-rate.pdf
Balogh, A. – Hamvai, R.M. – Horváth, G. – Nyikes, Á. – Török, G. (2022): Central bank digital currencies change access to money. In: MNB: New Sustainable Economy – Global Discussion Paper. Magyar Nemzeti Bank, Chapter 9, pp. 91–102. https://zoldpenzugyek.mnb.hu/sw/static/file/new_sustainable_economics_2022.pdf
Bareith, T. – Fertő, I. (2023): Stabilizálhatja-e a monetáris politika az élelmiszer-inflációt? (Can monetary policy stabilise food inflation?) Statisztikai Szemle (Hungarian Statistical Review), 101(4): 354–380. https://doi.org/10.20311/stat2023.04.hu0354
Botos, K. (2023): Inflation and finance. Public Finance Quarterly, 2023(4): 81–91. https://doi.org/10.35551/PFQ_2023_4_5
Brandao-Marques, L. – Casiraghi, M. – Gelos, G. – Harrison, O. – Kamber, G. (2023): Is high debt constraining monetary policy? Evidence from inflation expectations. BIS Working Paper No. 1141, November. https://doi.org/10.5089/9798400243059.001
Broniatowska, P. (2019): Population Ageing and inflation. Journal of Population Ageing, 12: 179–193. https://doi.org/10.1007/s12062-017-9209-z
Coibion, O. – Gorodnichenko, Y. – Kumar, S. (2018): How Do Firms Form Their Expectations? New Survey Evidence. The American Economic Review, 108(9): 2671–2713. https://doi.org/10.1257/aer.20151299
D’Acunto, F. – Malmendier, U. – Ospina, J. – Weber, M. (2021): Exposure to Grocery Prices and Inflation Expectations. Journal of Political Economy, 129(5): 1615–1639. https://doi.org/10.1086/713192
Dickens, E. (2011): Keynes’s theory of monetary policy: an essay in historical reconstruction. Contributions to Political Economy, 30(1): 1–11. https://doi.org/10.1093/cpe/bzr001
Friedman, M. (1968): The role of monetary policy. The American Economic Review, 58(1): 1–17. https://www.aeaweb.org/aer/top20/58.1.1-17.pdf
Gillitzer, C. – Simon, J. (2015): Inflation Targeting: A Victim of Its Own Success. RDP 2015-09, Reserve Bank of Australia. https://www.ijcb.org/journal/ijcb15q4a8.pdf
Halmai, P. (2023): Globalisation versus Deglobalisation. Financial and Economic Review, 22(2): 5–24. https://doi.org/10.33893/FER.22.2.5
Juselius, M. – Takáts, E. (2021): Inflation and demography through time. Journal of Economic Dynamics and Control, 128, 104136. https://doi.org/10.1016/j.jedc.2021.104136
Kiss, L.L. – Raciborski, E. (2024): A digitális jegybankpénz lehetséges szerepe a zöld átmenetben (The potential role of digital central bank money in the green transition). Szakmai cikk (Feature article), Magyar Nemzeti Bank, 26 March. https://www.mnb.hu/letoltes/kiss-lorant-laszlo-raciborski-eszter-a-digitalis-jegybankpenz-potencialis-szerepe-a-zold-atmenetben.pdf
Kóczián, B. (2022): Potential Advantages of Retail Central Bank Digital Currency. Financial and Economic Review, 21(3): 149–158. https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-21-3-fa1-koczian.pdf
Kóczián, B. – Sajtos, P. – Varga, L. (2023): A pénz evolúciójának következő lépcsőfoka: digitális jegybankpénz. De mi az pontosan, és miért jelenthet előrelépést a felhasználóknak? (The next stage in the evolution of money: central bank digital currency. But what exactly is it and why can it be a step forward for users?) Szakmai cikk (Feature article), Magyar Nemzeti Bank, 18 August. https://www.mnb.hu/letoltes/koczian-balazs-sajtos-peter-varga-lorant-a-penz-evoluciojanak-kovetkezo-lepcsofoka-digitalis-jegybankpenz.pdf
Kolozsi, P.P. – Horváth, B.I. – Csutiné Baranyai, J. – Tengely, V. (2022): Monetary Policy and Green Transition. Financial and Economic Review, 21(4): 7–28. https://doi.org/10.33893/FER.21.4.7
Kuti, Zs. (2023): Az elmúlt egy év a monetáris politika tükrében – miért volt szükség egy éve rendkívüli jegybanki beavatkozásra? (The past year in the mirror of monetary policy – why was the extraordinary central bank intervention necessary a year ago?) Szakmai cikk (Feature article), Magyar Nemzeti Bank, 15 November https://www.mnb.hu/letoltes/kuti-zsolt-az-elmult-egy-ev-a-monetaris-politika-tukreben-miert-volt-szukseg-egy-eve-rendkivuli-jegybanki-beavatkozasra.pdf
Lentner, Cs. – Zsarnóczai, J.S. (2022): Some Aspects of Fiscal and Monetary Tools of the Environmental Sustainability – Through the Case of Hungary. Public Governance, Administration and Finances Law Review, 7(1): 63–76. https://doi.org/10.53116/pgaflr.2022.1.5
MNB (2019a): Report 2013–2019. Magyar Nemzeti Bank. https://www.mnb.hu/letoltes/mnb-report-2013-2019-eng-digita-lis.pdf
MNB (2019b): Competitiveness Programme in 330 points. Magyar Nemzeti Bank. https://www.mnb.hu/en/publications/reports/competitiveness-programme/competitiveness-programme-in-330-points
MNB (2023a): Is there a valley beyond the mountain? – Disinflation following high-inflation episodes in the past 50 years. In: Inflation Report, March. https://www.mnb.hu/letoltes/eng-ir-digitalis-19.pdf
MNB (2023b): Versenyképességi jelentés (Competitiveness report). Magyar Nemzeti Bank. https://www.mnb.hu/letoltes/versenyke-pesse-gi-jelente-s-2023.pdf
MNB (2024): Factors underlying domestic food inflation. Pareto Workshop, In-depth Analysis, Magyar Nemzeti Bank. https://www.mnb.hu/letoltes/mnb100-factors-underlying-domestic-food-inflation.pdf
Matolcsy, Gy. (2020): Economic Balance and Growth 2010–2019. From the last to the first. Second Edition. Magyar Nemzeti Bank.
Matolcsy, Gy. (2022): Az új évtized mintázatai (On the Edge of the New Decade). Polgári Szemle (Civic Review), 18(4–6): 13–32. https://doi.org/10.24307/psz.2022.1203
Mishchenko, V. – Naumenkova, S. (2021): The impact of digital currency on the transformation of monetary policy. Three Seas Economic Journal, 2(4): 43–48. https://doi.org/10.30525/2661-5150/2021-4-8
Nagy Mohácsi, P. – Evdokimova, T. – Ponomarenko, O. – Ribakova, E. (2024): Emerging Market Central Banking and Communication: The Great Catchup. Financial and Economic Review, 23(1): 29–49. https://doi.org/10.33893/FER.23.1.29
Nguyen-Huu, T. – Örsal, D.K. (2024): Geopolitical risks and financial stress in emerging economies. The World Economy, 47(1): 217–237. https://doi.org/10.1111/twec.13529
OECD (2023): Economic Outlook. 2023(2). OECD. https://doi.org/10.1787/7a5f73ce-en
Reboredo, J.C. – Ugolini, A. (2022): Climate transition risk, profitability and stock prices. International Review of Financial Analysis, 83, 102271. https://doi.org/10.1016/j.irfa.2022.102271
Svensson, L.E.O. (1997): Inflation forecast targeting: Implementing and monitoring inflation targets. European Economic Review, 41(6): 1111–1146. https://doi.org/10.1016/S0014-2921(96)00055-4
Tatay, T. (2015): A központi bankok változó szerepe (The Changing Roles of Central Banks). Polgári Szemle (Civic Review), 11(1–3): 90–101. http://epa.niif.hu/00800/00890/00061/pdf/EPA00890_polgari_szemle_2015_1-3_090-101.pdf
Vlieghe, G. (2022): Demographics and other constraints on future monetary policy. The Journal of the Economics of Ageing, 23(October), 100424. https://doi.org/10.1016/j.jeoa.2022.100424
Wyplosz, C. (2023): Big central banks and big public debts – The next challenges. In-depth analysis, ECON Committee. Monetary Dialogue Papers, September. https://www.europarl.europa.eu/cmsdata/274636/Final Wyplosz Sept 2023.pdf