Monetary policy: find the right balance!

Júlia Király, Deputy Governor

Magyar Nemzeti Bank

IT was successful in bringing down inflation…

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A series of adverse shocks: bad luck or something systemic?

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…but not in stabilizing inflation around the MNB’s target(s)

Mismeasurment of the output gap

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Estimated output gap between Q1:1995 and Q2:2008

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Not always easy to find the right model!

Theoretical consistency

Data coherence

1.

2.

2.

3.

2a. Complex full-fledgedDSGE

2b. Complex VECM

3. Small scale intuitive policy oriented

„Dirty floating” is inconsistent with IT!

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Price stability VERSUS? financial stability

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PRICE

STABILITY

FINANCIAL

STABILITY

FLEXIBLE INFLATION

TARGETING

MACROPRUDENTIAL

POLICIES