Capital Flows in a Transitional Economy and the Sterilization Dilemma: The Hungarian Case

Pierre Siklos

No 1996/086, IMF Working Papers from International Monetary Fund

Abstract: 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. The empirical data indicate that sterilized interventions by the National Bank of Hungary (NBH) were not significant until mid-1994, sometime after the return to power of the former Communist leaders. Thus, 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.

Keywords: WP; exchange rate; monetary policy; capital; NBH governor; credit creation; reaction function; money stock; proxy monetary policy action; NBH data source; monetary policies in the transitional economies; Real exchange rates; Monetary base; Sterilization; Demand for money; Capital flows; Asia and Pacific; South America; Eastern Europe (search for similar items in EconPapers)
Pages: 36
Date: 1996-08-01
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Citations: View citations in EconPapers (5)

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