Is Hungary Ready for Inflation Targeting?

This paper considers whether the adoption of inflation targets for Hungary, an emerging market economy, is a desirable option. We consider the qualitative and quantitative pre-conditions required for the successful adoption of inflation control objectives. Although it is found that the National Bank of Hungary appears to possess a reaction function with some of the main features found in those estimated for industrial economies, there remain certain aspects of the relationship between the government and the central bank that require additional clarification