The impact of macroeconomic factors on food price inflation : the case of Hungary

Recent episodes of high and volatile food inflation in developed and emerging economies have led policymakers around the world to confront the question of how effective monetary policy is in stabilising food price pressures. The small number of empirical studies has been limited to Central European countries, including Hungary. We analyze the role of macroeconomic factors on food inflation in Hungary from January 2007 to November 2022. The long-run relationship is confirmed among the variables using the ARDL bounds testing approach to cointegration. Employing the Nonlinear Autoregressive Distributed Lag (NARDL) as estimation strategy, this study is probably the first attempt to examine the asymmetric relationship between food inflation and macroeconomic variables relevant to monetary policymaking. The results show that a change in consumer price index and USD exchange rate also induces changes in the food inflation in both directions in the long run. However we do not find signicant results for global food price index and monetary policy proxied monetary base. The symmetry test statistics suggest the existence of a symmetric relationship between food price inflation and macroeconomic variables in the long-run as well as in the short-run