Author(s): Ádám CSÁPAI

Title: EFFECT OF EXOGENOUS MONETARY POLICY SHOCKS ON SELECTED MACROECONOMIC VARIABLES IN HUNGARY: A SVAR APPROACH

Source: E. Korcsmáros (ed.): 12th International Conference of J. Selye University. Economics Section. Conference Proceedings

ISBN: 978-80-8122-375-4

DOI: https://doi.org/10.36007/3754.2020.115

Publisher: J. Selye University, Komárno, Slovakia

PY, pages: 2020, 115-131

Published on-line: 2020

Language: en

Abstract: The aim of this research paper is to estimate a structural vector autoregressive model of the Hungarian economy and present the reactions of the selected macroeconomic variables to an exogenous monetary policy shock. We estimate the model with recursive short run restrictions. We analyze monthly data of industrial production, prices, interest rates and the exchange rate ranging from 2004 to 2019. Some of our results are in accordance with economic theory. As a result of one standard deviation monetary policy shock, interest rates rise and the exchange rate appreciates. On the other hand, industrial production increases for one month before the expected decline. The price puzzle is also present, but the effects of the shocks are statistically insignificant. We also present the forecast error variance decompositions and check the robustness of our results by changing the identification scheme. The reactions of macroeconomic variables appear to be robust, except for the industrial production.

Keywords: SVAR, forecast error variance decomposition, monetary policy in Hungary, Cholesky decomposition, vector autoregressive

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