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Competitio

Vol. 11 No. 1 (2012)
Papers

Monetary Impacts and Overshooting of Agricultural Prices in Hungary

Published:
2012-06-18
DOI Linkhttps://doi.org/10.21845/comp/2012/1/3
Author
Zoltan Bakucs
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PDF (Hungarian)
Keywords
agricultural prices monetary shock overshooting fixed and flexible sectors of the national economy
How To Cite
Selected Style: APA
Bakucs, Z. (2012). Monetary Impacts and Overshooting of Agricultural Prices in Hungary. Competitio, 11(1), 39-49. https://doi.org/10.21845/comp/2012/1/3
Abstract

This paper employs the theoretical model developed by Shagaian et al. 2002, to analyse the response of various sectors of the Hungarian national economy to changes in the money supply. Johansen co-integration and vector error correction methodology is used to test whether agricultural prices overshoot their long-run equilibrium path if a monetary shock hits the system. Our results emphasise that agricultural prices do adjust faster to changes in macroeconomic conditions, in particular money supply, than industrial prices, thus affecting relative prices in the short-run; however, strict long-run money neutrality does
not hold. The result is that flexible sectors of the national economy, such as agriculture or services, bear the burden of adjustment, with significant consequences for farms’ viability.

Journal of Economic Literature (JEL) classifications: C32, E51, P22, Q11.

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