March 2011 marked the introduction of the Magyar Nemzeti Bank’s Monetary Policy Model (MPM), representing a paradigm shift in both macroeconomic projection and monetary policy decision support. In contrast to previous conditional projections, the MPM provides an endogenous definition of both...

We explore the properties of welfare-maximizing monetary policy in a medium-scale DSGE model for Hungary. In order to make our results operational from a policymaker’s perspective, we approximate the optimal policy rule with a set of simple rules reacting only to observable variables. Our...