The Hungarian Way - Targeted Central Bank Policy [antikvár]

Foreword The complex challenges that emerged in the wake of the global economic crisis necessitated new economic policy responses all over the world; therefore, the targeted measures, sometimes regarded as unconventional, have become crucial in successful crisis management and the preservation of sustainable growth and financial stability on a long-term basis. Hungary has been a trailblazer in overhauling economic policy in recent years. Our book presents the Hungarian way from the perspective of targeted central bank policy. In the approximately one decade before 2010, the Hungarian economy was characterised by an unsustainable growth path. As a result of irresponsible fiscal policy, the budget deficit rose to persistently high levels, while the government debt increased substantially. Excessively loose fiscal policy was coupled with excessively tight monetary policy; however, the central bank was still unable to achieve its price stability objective, i.e. massive inflation persisted. However, 2010 ushered in a change of course in economic policy, as a result of which Hungary first performed a fiscal turnaround. In addition to responsible fiscal management, structural reforms leading to the country's convergence gained prominence. Within the framework of a comprehensive tax reform, the flat-rate personal income tax was introduced, taxes on labour and small and medium-sized enterprises were cut considerably, and large corporations were involved to make the distribution of the tax burden more equitable. Yet, fiscal balance in itself would not have been sufficient to ensure long-term financial stabilisation and sustainable economic growth; these called for fundamental changes in monetary policy as well, which were implemented only from 2013. Central banks have been traditionally characterised by conservative decision-making and consistency. However, the multifaceted 2008 global financial crisis forced monetary authorities to use new instruments.