Monetary policy in the service of financial nationalism. The case of post-2013 Hungary

Abstract

Recognising the limitations of the thin-centred, context-specific nature of economic nationalism, the paper aims to clarify and empirically enrich this concept by focusing on the small, open, transnationally integrated countries of the (semi-)periphery. The paper identifies the ideal-type monetary policies of economic nationalism for this specific universe of cases. Hungarian monetary policy after 2013 is identified as a critical case to show how economic nationalism manifests itself in monetary technicalities within the EU environment. The paper examines three flagship programmes of the Hungarian National Bank and shows that they were imbued with economic nationalism. Although extreme macroeconomic imbalances had developed by the end of the period, the paper insists on a value-neutral conceptualisation of economic nationalism. On the one hand, it presents a number of achievements of the programmes that can be appreciated not only from a narrow nationalist perspective. On the other hand, it shows that economic nationalism tends to undermine central bank independence, contribute to politically induced business cycles and overheat the economy. The results suggest that small, open, transnationally integrated countries can optimise policy outcomes by striking a subtle balance between autonomous decision-making and meeting the external demands of the globalised world economy.