Drivers of Inflation: Hungary

By Estefania Cohn-Bech, Karim Foda, Agustin Roitman

February 26, 2023

Preview Citation

Format: Chicago

Estefania Cohn-Bech, Karim Foda, and Agustin Roitman. Drivers of Inflation: Hungary, (USA: International Monetary Fund, 2023) accessed November 8, 2024

Summary

Though high and rising inflation has been a challenge for most economies across Europe in 2022 and into 2023, it has accelerated in Hungary to the highest level in Europe. This paper examines how and why Hungary reached historically high inflation. It draws on an augmented Phillips Curve to estimate the impact of common drivers of inflation, examines the role of labor market tightness and policy stances, and analyzes possible changes to the degree of exchange rate pass-through in recent years. Overall, a rapid recovery from the COVID-19 crisis, a series of exogenous shocks, and too loose a policy mix fueled inflation to its highest level in decades. Though monetary and fiscal policies are now tightening, regulatory price caps undermine those efforts. Going forward, a consistently and persistently tight overall policy mix is needed to drive inflation back to the central bank’s target.

Subject: International organization, Monetary policy

Keywords: Hungary, Inflation, Macroeconomic policy coordination

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Selected Issues Paper No. 2023/004
Stock No:

SIPEA2023004
ISBN:

9798400234163
ISSN:

2958-7875

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