{
  "title": "Capital Flows in a Transitional Economy and the Sterilization Dilemma: The Hungarian Case",
  "publication": "IMF Working Papers, August 1, 1996",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/capital-flows-in-a-transitional-economy-and-the-sterilization-dilemma-the-hungarian-case-2066",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2016/12/30/capital-flows-in-a-transitional-economy-and-the-sterilization-dilemma-the-hungarian-case-2066",
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  "summary": "This paper compares Hungary’s experience with sterilization with that of other capital inflow episodes. The study focuses on the short-run impact of sterilization on monetary policy.",
  "sections": [
    {
      "heading": "Summary and purpose",
      "content": "- Compares Hungary’s experience with sterilization with that of other capital inflow episodes.\n- Focuses on the short-run impact of sterilization on monetary policy.\n- Empirical data indicate that sterilized interventions by the National Bank of Hungary (NBH) were not significant until mid-1994.\n- In the second half of 1994, the NBH began to demonstrate more firmly its independence by tightening monetary policy.\n- By the beginning of 1995, the direction of fiscal policy had begun to show consonance with the overall aims of monetary policy."
    },
    {
      "heading": "Empirical findings",
      "content": "- Sterilized interventions by the NBH were not significant until mid-1994.\n- The NBH tightened monetary policy in the second half of 1994, signaling greater central bank independence.\n- Fiscal policy alignment with monetary policy objectives emerged by the beginning of 1995."
    },
    {
      "heading": "Substantive themes and technical focus",
      "content": "- Subjects addressed:\n  - Balance of payments\n  - Capital flows\n  - Central banks\n  - Demand for money\n  - Foreign exchange\n  - Monetary base\n  - Money\n  - Real exchange rates\n  - Sterilization\n- Keywords listed in the study include:\n  - Asia and Pacific, capital, Capital flows, credit creation, Demand for money, Eastern Europe, exchange rate, Monetary base, monetary policies in the transitional economies, monetary policy, money stock, NBH data source, NBH governor, proxy monetary policy action, reaction function, Real exchange rates, South America, Sterilization, WP"
    },
    {
      "heading": "Policy implications and interpretation",
      "content": "- The timing of significant sterilized interventions suggests a link between political developments (return to power of the former Communist leaders) and the NBH’s policy actions.\n- The NBH’s tightening of monetary policy in H2 1994 demonstrated a move toward greater monetary independence.\n- Fiscal policy movements by early 1995 indicated growing consonance with monetary policy aims, implying a shift toward coordinated macroeconomic policy.\n\n---\n\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/capital-flows-in-a-transitional-economy-and-the-sterilization-dilemma-the-hungarian-case-2066"
    }
  ],
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    "[Markdown version](/en/publications/wp/issues/2016/12/30/capital-flows-in-a-transitional-economy-and-the-sterilization-dilemma-the-hungarian-case-2066/index.md)",
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    "Authors: Pierre L. Siklos",
    "Published: August 1, 1996",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451850833.001",
    "Compares Hungary’s experience with sterilization with that of other capital inflow episodes.",
    "Focuses on the short-run impact of sterilization on monetary policy.",
    "Empirical data indicate that sterilized interventions by the National Bank of Hungary (NBH) were not significant until mid-1994.",
    "In the second half of 1994, the NBH began to demonstrate more firmly its independence by tightening monetary policy.",
    "By the beginning of 1995, the direction of fiscal policy had begun to show consonance with the overall aims of monetary policy.",
    "Sterilized interventions by the NBH were not significant until mid-1994.",
    "The NBH tightened monetary policy in the second half of 1994, signaling greater central bank independence.",
    "Fiscal policy alignment with monetary policy objectives emerged by the beginning of 1995.",
    "Subjects addressed:",
    "Keywords listed in the study include:",
    "The timing of significant sterilized interventions suggests a link between political developments (return to power of the former Communist leaders) and the NBH’s policy actions.",
    "The NBH’s tightening of monetary policy in H2 1994 demonstrated a move toward greater monetary independence.",
    "Fiscal policy movements by early 1995 indicated growing consonance with monetary policy aims, implying a shift toward coordinated macroeconomic policy."
  ],
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