unmapped effects. The existence of three cointegration vectors amongst the Hungarian
agricultural prices, industrial prices, exchange rate, and money supply, proves the existence of
a long-run equilibrium relationship between the variables. It follows, that shocks to
macroeconomic variables find their way onto the agricultural sector. After identifying the
cointegrating equations and examining the slope coefficient of the money supply, we found
that the money neutrality hypothesis doesn’t hold for Hungary. In accordance with the
theoretical model mentioned above, we found evidence that agricultural prices adjust faster to
monetary shocks than industrial prices do. The other flexible sector considered (the exchange
rate) also adjusts faster to temporary shocks than the sticky, industrial sector. Thus, if a
monetary shock occurs, the flexible sectors will have to bear the burden of adjustment,
reducing the financial viability of the Hungarian farmers.
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