The interaction between fiscal and monetary policy in Hungary over the past decade and a half

György Matolcsy and Dániel Palotai ()
Additional contact information
György Matolcsy: Governor of the Magyar Nemzeti Bank
Dániel Palotai: Magyar Nemzeti Bank

Financial and Economic Review, 2016, vol. 15, issue 2, 5–32

Abstract: After the introduction of inflation targeting in 2001, fiscal and monetary policy were out of sync for 12 years, which wreaked havoc on the Hungarian economy due to the close relationship and interaction between the two. After 2013, on the back of the fiscal reforms of the previous two to three years, and the subsequent monetary policy reforms restored the desired harmony, which contributed to achieving the objectives of the two parties, including price stability, financial stability and sustainable fiscal policy, while also laying the groundwork for long-term growth. This paper investigates which mix of fiscal and monetary policy has shaped the past 15 years and the channels through which fiscal and monetary economic policy of different activity or dominance impacted each other, and the degree of success of their (co)operation. The model devised by Eric Leeper provided the conceptual and theoretical framework for our study, while the actual data and experiences are drawn from Hungary’s economic history of the past 15 years. This paper also takes a closer look at the causes, objectives, main elements and impact of the turnaround in fiscal policy that took place between 2010 and 2013 and in monetary policy after 2013.

Keywords: monetary policy; fiscal policy; economic policy consistency; fiscal dominance theory; Hungarian economic history (search for similar items in EconPapers)
JEL-codes: E52 E63 O23 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://english.hitelintezetiszemle.hu/letoltes/gyo ... aniel-palotai-en.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mnb:finrev:v:15:y:2016:i:2:p:5-32

Access Statistics for this article

More articles in Financial and Economic Review from Magyar Nemzeti Bank (Central Bank of Hungary) Contact information at EDIRC.
Bibliographic data for series maintained by Morvay Endre ( this e-mail address is bad, please contact ).