Painless Disinflation? Monetary Policy Rules in Hungary, 1991-1999

40 Pages Posted: 12 Jan 2001

See all articles by Roberto Golinelli

Roberto Golinelli

University of Bologna - Department of Economics

Riccardo Rovelli

University of Bologna - Department of Economics; IZA Institute of Labor Economics

Date Written: September 2001

Abstract

We estimate a small structural model for inflation, the output gap, the domestic interest rate and the exchange rate for Hungary during the period of the transition (1991-1999). The transmission of monetary policy impulses to macro variables is characterized in a similar fashion to that of advanced open industrial countries. In particular, in the context of our rational expectations, forward-looking model, the interest rate channel on aggregate demand and the exchange-rate channel work together as parts of the same disinflation policy. We draw several conclusions on understanding and modeling the effects of monetary policy, and also on the desirable design of policy rules during the process of disinflation.

Keywords: disinflation policy, interest rate rules, transition economies, small open-economy macro models, estimation and simulation of rational expectations models

Keywords: Disinflation policy, Interest rate rules, Transition economies, Small open-economy macro models, Estimation and simulation of rational expectations models.

JEL Classification: E17, E52, P24

Suggested Citation

Golinelli, Roberto and Rovelli, Riccardo, Painless Disinflation? Monetary Policy Rules in Hungary, 1991-1999 (September 2001). Available at SSRN: https://ssrn.com/abstract=256135 or http://dx.doi.org/10.2139/ssrn.256135

Roberto Golinelli

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy
+39 051 209 2638 (Phone)
+39 051 209 2664 (Fax)

Riccardo Rovelli (Contact Author)

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy
+39 051 2092 601 (Phone)
+39 051 6402 664 (Fax)

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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