What is it about?
Food prices have been rising significantly in Hungary, affecting families and creating challenges for policymakers. This study looks at how changes in monetary policy, like adjusting interest rates or money supply, influence food prices in the country. Using data from 2007 to 2023, we found that the relationship between monetary policy and food prices is complex. For example, while reducing short-term government bond yields can help during periods of high food inflation, other factors, like household spending and global food prices, also play a big role. Our research highlights that food prices are not always affected by monetary policy in the same way as other goods, especially in smaller economies like Hungary. Policymakers need to consider these nuances when making decisions to stabilize food costs and support vulnerable populations. This work provides new insights that can help create more effective strategies to address rising food prices, both in Hungary and in other countries facing similar challenges.
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Why is it important?
This study is both unique and timely as it tackles the often-overlooked relationship between monetary policy and food price inflation in Hungary, a country where food costs make up a significant portion of household spending. By using cutting-edge econometric techniques like quantile regression, the research uncovers nuanced insights into how monetary policy impacts food prices differently across inflation levels—a perspective missed by traditional methods. The study's focus on data from 2007 to 2023 makes it particularly relevant, encompassing key global shocks such as the COVID-19 pandemic and the Russo-Ukrainian war, which have heightened inflationary pressures worldwide. It also challenges conventional wisdom by showing that common monetary tools like adjusting the money supply or interest rates may not work effectively to curb food inflation in a small, open economy like Hungary. The implications extend beyond academia, offering policymakers actionable strategies to balance domestic monetary decisions with global food price dynamics. This timely research is poised to influence both national policy and international discussions, making a meaningful contribution to addressing one of today’s most pressing economic challenges.
Perspectives
This publication holds personal significance for me because it addresses a deeply relevant issue: the interplay between monetary policy and food price inflation. Hungary’s economic landscape, marked by high food inflation and global disruptions, provides a compelling case to explore how conventional economic tools can fall short in complex, real-world scenarios. What excites me most about this research is its ability to bridge theoretical insights with practical implications. By leveraging advanced methods like quantile regression, we’ve been able to uncover hidden patterns and dynamics that challenge traditional economic assumptions. For me, this isn’t just about academic contribution—it’s about sparking conversations and offering solutions that could alleviate the financial burden on households and inform better policymaking. Through this work, I hope to inspire further exploration into how small, open economies like Hungary can navigate global challenges with innovative and tailored approaches. It’s my hope that this study not only advances understanding but also contributes to meaningful change in how we tackle the complex issue of food inflation.
Professor Imre Fertő
HUN-REN Centre for Economic and Regional Studies
Read the Original
This page is a summary of: Monetary policy and food price inflation: the case of Hungary, Journal of Agribusiness in Developing and Emerging Economies, May 2024, Emerald,
DOI: 10.1108/jadee-10-2023-0251.
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