This paper presents a Structural Vector Autoregressive (SVAR) model with particular attention to the Hungarian labour market. The identification of structural shocks is based on sign restrictions. We identify four structural shocks: a labour supply, an aggregate supply, an aggregate demand and a monetary policy shock. It is worth emphasising that a negative labour supply shock cannot be distinguished from minimum wage hikes in this model. Impulse response analysis shows that after an aggregate supply shock, real wages react more persistently and to a greater extent than prices. In addition, aggregate supply and monetary policy shocks induce relatively strong reactions on the real side of the economy. Unlike in estimated DSGE models for Hungary, we found a positive response of employment with respect to monetary policy shock. All impulse responses are estimated to be less persistent than in the SVAR model estimated using eurozone data pointing to a more flexible Hungarian economy. Our impulse responses are closer to the DSGE model of Jakab and Világi (2008) and Baksa, Benk and Jakab (2009) than to the model of Jakab and Kónya (2009) which describes a relatively rigid labour market. Historical decomposition exercises revealed the presence of positive labour supply shocks between 2003 and 2006. The other important factor in explaining employment was aggregate supply shock. Neither monetary nor aggregate demand shocks contributed significantly to employment fluctuations.