A tanulm ¶ any eredetileg angol nyelven kerÄ ul publik ¶ al ¶ asra ,,Does`The' Fiscal Multiplier ... more A tanulm ¶ any eredetileg angol nyelven kerÄ ul publik ¶ al ¶ asra ,,Does`The' Fiscal Multiplier Exist? Fiscal and Monetary Reactions, Credibility and Fiscal Multipliers in Hungary" c ¶ ³mmel, a KÄ olts ¶ egvet ¶ esi Tan ¶ acs titk ¶ ars ¶ aga kiad ¶ as ¶ aban. A magyar nyelvre ford ¶ ³t ¶ as Sebesty ¶ en Tam ¶ as munk ¶ aja. KÄ oszÄ onettel tartozunk Bencz ¶ ur P ¶ eternek, Csermely ¶ Agnesnek, Kopits GyÄ orgynek, Pete P ¶ eternek, Romh ¶ anyi Bal ¶ azsnak, Szil ¶ agyi Katalinnak valamint Vonn ¶ ak Bal ¶ azsnak hasznos ¶ eszrev ¶ eteleik ¶ ert. Minden fennmarad ¶ o hiba ¶ es t ¶ eved ¶ es a szerz} ok ¶ e.
This paper builds and estimates a medium scale, small open economy DSGE model augmented with sear... more This paper builds and estimates a medium scale, small open economy DSGE model augmented with search-and-matching frictions in the labor market, and different wage setting behavior in new and existing jobs. The model is estimated using Hungarian data between 2001-2008. We find that: (i) the inclusion of matching frictions significantly improves the model's empirical fit; (ii) the extent of new hires wage rigidity is quantitatively important for key macro variables; (iii) labor market shocks do not play an important role in inflation dynamics, but the structure of the labor market influences the monetary transmission mechanism.
The analysis is based on the MNB study titled Correction of global imbalances: illustrative scena... more The analysis is based on the MNB study titled Correction of global imbalances: illustrative scenarios for Hungary ('Globális egyensúlytalanságok: illusztratív szcenáriók Magyarországra') by Cecília Hornok, Zoltán M. Jakab and Máté Barnabás Tóth (2006). For details see this study.
The GPM project is designed to improve the toolkit for studying both own-country and crosscountry... more The GPM project is designed to improve the toolkit for studying both own-country and crosscountry linkages. This paper creates a special version of GPM that includes the four largest Euro Area (EA) countries. The EA countries are more vulnerable to domestic and external demand shocks because adjustments in the real exchange rate between EA countries occur more gradually through inflation differentials. Spillovers from tight credit conditions in each EA country are limited by direct trade channels and small confidence spillovers, but we also consider scenarios where banks in all EU countries tighten credit conditions simultaneously.
This paper presents a Structural Vector Autoregressive (SVAR) model with particular attention to ... more This paper presents a Structural Vector Autoregressive (SVAR) model with particular attention to the Hungarian labour market. The identification of structural shocks is based on sign restrictions. We identify four structural shocks: a labour supply, an aggregate supply, an aggregate demand and a monetary policy shock. It is worth emphasising that a negative labour supply shock cannot be distinguished from
This paper explores the major determinants of the exchange rate pass-through to CPI. The simulati... more This paper explores the major determinants of the exchange rate pass-through to CPI. The simulations were performed with the Bank's estimated Hungarian block linked to the NIGEM model of the National Institute of Economic and Social Research (NIESR). The modelling framework offers some insight into the role of different markets in the price-exchange rate relationship. The paper gives an analysis of the relative importance of expectations, goods and labour market parameters. Our results show that the contribution of goods and labour market parameters to explaining the economy-wide exchange rate pass-through changes over time. While goods market adjustment is significant from the start of an exchange rate shock, the labour market starts to gain importance only from year three and onwards. More specifically, the effect of mark-up adjustment prevails over the whole horizon, which indicates that it is the most significant channel in exchange rate pass-through. The slow appearance of...
This paper investigates the different sources of real exchange rate fluctuations in Hungary. We c... more This paper investigates the different sources of real exchange rate fluctuations in Hungary. We consider the effect of tradable pricing behavior and nominal rigidities in tradable real-exchange rate movements, and investigate the importance of relative productivity changes between the tradable and nontradable sector in relative price (nontradable/tradable) adjustments. We formulate a policy reaction function to separate the effect of tradable pricing shocks from policy shocks. The framework we use is a two sector open economy real exchange rate model. Its contemporaneous structure is used for the identification of structural shocks. Since the effect of policy shocks on tradable real exchange rate was not significant, our results suggest that nominal rigidities did not play an important role during the period under consideration. The evolution of nontradable prices and relative (nontradable/tradable) prices were well explained by nontradable output shocks. Thus, the Balassa-Samuelson-effect seems to have been at work in Hungary during the first eight years of transition.
This paper develops and estimates a small open economy DSGE model with searchand-matching rigidit... more This paper develops and estimates a small open economy DSGE model with searchand-matching rigidities on Hungarian data. Our main ndings are as follows: (i) over and above what is implied by matching frictions, we do not nd wages to be particularly rigid in Hungary; (ii) labor market developments are propageted to the broader economy; (iii) shocks originating outside the labor market are important for some, but not all labor market variables, and (iv) changes in activity are a very important driving force of uctuations not only on the labor market, but also for other variables like in ation.
Japan has ambitious economic goals: 3 percent nominal growth; 2 percent inflation; and a primary ... more Japan has ambitious economic goals: 3 percent nominal growth; 2 percent inflation; and a primary budget surplus. Abenomics has employed the three arrows of monetary, fiscal and structural policies, but the goals remain out of reach. We propose that countercyclical measures be embedded in long-run frameworks that anchor expectations for inflation and public debt. In addition, we argue for an incomes policy to assist reflation. Model simulations suggest that, combined, these proposals would make headway towards the goals, with, on balance, a better chance of success than the more unconventional policy alternatives proposed by Krugman, Svensson, and Turner from a risk-return perspective. JEL Classification Numbers: E31; E39; E52; E62; E64
DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessari... more DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.
Japan has ambitious economic goals: 3 percent nominal growth; 2 percent inflation; and a primary ... more Japan has ambitious economic goals: 3 percent nominal growth; 2 percent inflation; and a primary budget surplus. Abenomics has employed the three arrows of monetary, fiscal and structural policies, but the goals remain out of reach. We propose that countercyclical measures be embedded in long-run frameworks that anchor expectations for inflation and public debt. In addition, we argue for an incomes policy to assist reflation. Model simulations suggest that, combined, these proposals would make headway towards the goals, with, on balance, a better chance of success than the more unconventional policy alternatives proposed by Krugman, Svensson, and Turner from a risk-return perspective.
This paper is a comprehensive analysis of Hungary's potential output. Since the concept of potent... more This paper is a comprehensive analysis of Hungary's potential output. Since the concept of potential output is not unique, we present various interpretations of potential GDP, along with a large set of techniques for estimating it. Various estimates are presented and robustness analyses are performed. Finally, an illustrative scenario is outlined for the forthcoming few years.
This paper presents a nationwide economy model for Hungary used by the National Bank of Hungary f... more This paper presents a nationwide economy model for Hungary used by the National Bank of Hungary for analyzing the effects of world shocks, for quarterly forecasting exercises and other policy simulations. The study has two main goals: Firstly, it presents a model for the Hungarian economy developed in collaboration between the National Bank of Hungary and the National Institute of Economic and Social Research. The model is a one-sector aggregate economy model with a theoretically consistent supply side. Foreign direct investment is given a particular role in explaining the sources of growth both in the production process and in foreign trade. Secondly, there is a brief discussion of the National Institute's Global Econometric Model (NIGEM), to which the Hungarian model is linked. In this setup, we are also able to analyze the effect of world shocks on the domestic economy. For testing model properties, policy simulations are presented for various shocks. A case study on the effect of the Russian crisis on Hungary is also discussed for the purpose of testing parameter adequacy. Simulation results show that the Hungarian block of the NIGEM model is able to capture the effects of these shocks, hence it might be an appropriate model framework for analyzing different shocks.
A tanulm ¶ any eredetileg angol nyelven kerÄ ul publik ¶ al ¶ asra ,,Does`The' Fiscal Multiplier ... more A tanulm ¶ any eredetileg angol nyelven kerÄ ul publik ¶ al ¶ asra ,,Does`The' Fiscal Multiplier Exist? Fiscal and Monetary Reactions, Credibility and Fiscal Multipliers in Hungary" c ¶ ³mmel, a KÄ olts ¶ egvet ¶ esi Tan ¶ acs titk ¶ ars ¶ aga kiad ¶ as ¶ aban. A magyar nyelvre ford ¶ ³t ¶ as Sebesty ¶ en Tam ¶ as munk ¶ aja. KÄ oszÄ onettel tartozunk Bencz ¶ ur P ¶ eternek, Csermely ¶ Agnesnek, Kopits GyÄ orgynek, Pete P ¶ eternek, Romh ¶ anyi Bal ¶ azsnak, Szil ¶ agyi Katalinnak valamint Vonn ¶ ak Bal ¶ azsnak hasznos ¶ eszrev ¶ eteleik ¶ ert. Minden fennmarad ¶ o hiba ¶ es t ¶ eved ¶ es a szerz} ok ¶ e.
This paper builds and estimates a medium scale, small open economy DSGE model augmented with sear... more This paper builds and estimates a medium scale, small open economy DSGE model augmented with search-and-matching frictions in the labor market, and different wage setting behavior in new and existing jobs. The model is estimated using Hungarian data between 2001-2008. We find that: (i) the inclusion of matching frictions significantly improves the model's empirical fit; (ii) the extent of new hires wage rigidity is quantitatively important for key macro variables; (iii) labor market shocks do not play an important role in inflation dynamics, but the structure of the labor market influences the monetary transmission mechanism.
The analysis is based on the MNB study titled Correction of global imbalances: illustrative scena... more The analysis is based on the MNB study titled Correction of global imbalances: illustrative scenarios for Hungary ('Globális egyensúlytalanságok: illusztratív szcenáriók Magyarországra') by Cecília Hornok, Zoltán M. Jakab and Máté Barnabás Tóth (2006). For details see this study.
The GPM project is designed to improve the toolkit for studying both own-country and crosscountry... more The GPM project is designed to improve the toolkit for studying both own-country and crosscountry linkages. This paper creates a special version of GPM that includes the four largest Euro Area (EA) countries. The EA countries are more vulnerable to domestic and external demand shocks because adjustments in the real exchange rate between EA countries occur more gradually through inflation differentials. Spillovers from tight credit conditions in each EA country are limited by direct trade channels and small confidence spillovers, but we also consider scenarios where banks in all EU countries tighten credit conditions simultaneously.
This paper presents a Structural Vector Autoregressive (SVAR) model with particular attention to ... more This paper presents a Structural Vector Autoregressive (SVAR) model with particular attention to the Hungarian labour market. The identification of structural shocks is based on sign restrictions. We identify four structural shocks: a labour supply, an aggregate supply, an aggregate demand and a monetary policy shock. It is worth emphasising that a negative labour supply shock cannot be distinguished from
This paper explores the major determinants of the exchange rate pass-through to CPI. The simulati... more This paper explores the major determinants of the exchange rate pass-through to CPI. The simulations were performed with the Bank's estimated Hungarian block linked to the NIGEM model of the National Institute of Economic and Social Research (NIESR). The modelling framework offers some insight into the role of different markets in the price-exchange rate relationship. The paper gives an analysis of the relative importance of expectations, goods and labour market parameters. Our results show that the contribution of goods and labour market parameters to explaining the economy-wide exchange rate pass-through changes over time. While goods market adjustment is significant from the start of an exchange rate shock, the labour market starts to gain importance only from year three and onwards. More specifically, the effect of mark-up adjustment prevails over the whole horizon, which indicates that it is the most significant channel in exchange rate pass-through. The slow appearance of...
This paper investigates the different sources of real exchange rate fluctuations in Hungary. We c... more This paper investigates the different sources of real exchange rate fluctuations in Hungary. We consider the effect of tradable pricing behavior and nominal rigidities in tradable real-exchange rate movements, and investigate the importance of relative productivity changes between the tradable and nontradable sector in relative price (nontradable/tradable) adjustments. We formulate a policy reaction function to separate the effect of tradable pricing shocks from policy shocks. The framework we use is a two sector open economy real exchange rate model. Its contemporaneous structure is used for the identification of structural shocks. Since the effect of policy shocks on tradable real exchange rate was not significant, our results suggest that nominal rigidities did not play an important role during the period under consideration. The evolution of nontradable prices and relative (nontradable/tradable) prices were well explained by nontradable output shocks. Thus, the Balassa-Samuelson-effect seems to have been at work in Hungary during the first eight years of transition.
This paper develops and estimates a small open economy DSGE model with searchand-matching rigidit... more This paper develops and estimates a small open economy DSGE model with searchand-matching rigidities on Hungarian data. Our main ndings are as follows: (i) over and above what is implied by matching frictions, we do not nd wages to be particularly rigid in Hungary; (ii) labor market developments are propageted to the broader economy; (iii) shocks originating outside the labor market are important for some, but not all labor market variables, and (iv) changes in activity are a very important driving force of uctuations not only on the labor market, but also for other variables like in ation.
Japan has ambitious economic goals: 3 percent nominal growth; 2 percent inflation; and a primary ... more Japan has ambitious economic goals: 3 percent nominal growth; 2 percent inflation; and a primary budget surplus. Abenomics has employed the three arrows of monetary, fiscal and structural policies, but the goals remain out of reach. We propose that countercyclical measures be embedded in long-run frameworks that anchor expectations for inflation and public debt. In addition, we argue for an incomes policy to assist reflation. Model simulations suggest that, combined, these proposals would make headway towards the goals, with, on balance, a better chance of success than the more unconventional policy alternatives proposed by Krugman, Svensson, and Turner from a risk-return perspective. JEL Classification Numbers: E31; E39; E52; E62; E64
DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessari... more DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.
Japan has ambitious economic goals: 3 percent nominal growth; 2 percent inflation; and a primary ... more Japan has ambitious economic goals: 3 percent nominal growth; 2 percent inflation; and a primary budget surplus. Abenomics has employed the three arrows of monetary, fiscal and structural policies, but the goals remain out of reach. We propose that countercyclical measures be embedded in long-run frameworks that anchor expectations for inflation and public debt. In addition, we argue for an incomes policy to assist reflation. Model simulations suggest that, combined, these proposals would make headway towards the goals, with, on balance, a better chance of success than the more unconventional policy alternatives proposed by Krugman, Svensson, and Turner from a risk-return perspective.
This paper is a comprehensive analysis of Hungary's potential output. Since the concept of potent... more This paper is a comprehensive analysis of Hungary's potential output. Since the concept of potential output is not unique, we present various interpretations of potential GDP, along with a large set of techniques for estimating it. Various estimates are presented and robustness analyses are performed. Finally, an illustrative scenario is outlined for the forthcoming few years.
This paper presents a nationwide economy model for Hungary used by the National Bank of Hungary f... more This paper presents a nationwide economy model for Hungary used by the National Bank of Hungary for analyzing the effects of world shocks, for quarterly forecasting exercises and other policy simulations. The study has two main goals: Firstly, it presents a model for the Hungarian economy developed in collaboration between the National Bank of Hungary and the National Institute of Economic and Social Research. The model is a one-sector aggregate economy model with a theoretically consistent supply side. Foreign direct investment is given a particular role in explaining the sources of growth both in the production process and in foreign trade. Secondly, there is a brief discussion of the National Institute's Global Econometric Model (NIGEM), to which the Hungarian model is linked. In this setup, we are also able to analyze the effect of world shocks on the domestic economy. For testing model properties, policy simulations are presented for various shocks. A case study on the effect of the Russian crisis on Hungary is also discussed for the purpose of testing parameter adequacy. Simulation results show that the Hungarian block of the NIGEM model is able to capture the effects of these shocks, hence it might be an appropriate model framework for analyzing different shocks.
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