Hungary: Selected Issues
IMF Staff Country Reports, August 2, 2024
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- Hungary: Selected Issues
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Bibliographic details
- Published: August 2, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400286537.002
QPM adaptation and model structure
- The paper presents monetary policy analysis using a quarterly projection model (QPM) for Hungary.
- The standard QPM is adapted to reflect specific features of the Hungarian economy and the post-Covid set of shocks.
- Inflation is modelled in greater sectoral detail, including the separation of core goods and services, to capture differences in their drivers and dynamics and to model spillovers of shocks from one sector to another.
Key findings and projections
- Following a period of large interest rate reductions, the projections from the QPM suggest that the next phase of monetary policy normalization should proceed cautiously and more gradually.
- Results from the model should be used alongside other forms of analysis and expert judgement in determining the optimal path of monetary policy.
- Data should be watched keenly to assess the realism of the model’s projections.
Policy implications and recommendations
- Proceed cautiously and more gradually in the next phase of monetary policy normalization (as implied by QPM projections).
- Combine QPM results with other analytical approaches and expert judgement when setting policy.
- Monitor incoming data closely to validate or revise the model’s projections.
Model caveats and best practices
- The QPM is tailored to Hungary’s specific features and post-Covid shocks, implying that projections depend on the model’s structural choices and sectoral decomposition.
- Use of the model’s outputs should be complemented by alternative analyses and judgement; do not rely solely on the QPM for policy decisions.
- Vigilant data monitoring is necessary to assess the realism of projections and to inform policy calibration.
Content in this bundle
- Hungary: Selected Issues; IMF Country Report No. 24/269; July 18, 2024