Leverage and foreign ownership in Hungary

In this study enterprise leverage in Hungary is analysed with particular emphasis on the relationship between foreign equity investment and leverage. We examine the hypothesis according to which attracting foreign equity capital relatively early in the transition process might have resulted in relaxing the borrowing constraint for enterprises. The regression analysis reported shows support for this hypothesis. There exist indications that some progress towards the „equilibrium” financing configuration has taken place. Also we have been able to re produce some previous results of the literature concerning leverage in general. We compare the determinants of leverage in Hungary with those in industrialised and other transition economies, and find some interesting differences. A curious finding is that sectoral leverage levels have not followed industrial country patterns so far.

The theory and practice of interest rate smoothing

The interest rate policy of the Magyar Nemzeti Bank typically consists of taking several smaller steps in one direction. Other central banks follow similar practices. Their interest rate policy actions are characterised by gradual changes: in other words, they avoid sudden, major changes in interest rates and are wary of reversing interest rate cycles too frequently. This study will present the theoretical background of the practice of such interest rate smoothing, the motivations of central banks as revealed by their communication, and some important considerations for Hungarian monetary policy.interest rate smoothing, base rate, monetary policy.

Adopting the euro in Hungary: expected costs, benefits and timing

Accession to the Economic and Monetary Union is one of the most important steps in Hungary's European integration, which will entail abandoning the national currency and adopting the euro as domestic legal tender. For Hungary as a new member state in the EU, introduction of the euro will not be an option but an obligation. Nevertheless, new EU members will have some leeway to set the date of adopting the euro1. Therefore, it is useful to analyse the likely costs and benefits of joining the euro area for Hungary and to define the choice of medium-term economic policy strategy in the light of the results of this analysis. The National Bank of Hungary would like to contribute to the formulation of an economic policy strategy by issuing this volume, which contains a cost-benefit analysis of the likely effects of the country's joining the euro area. This analysis is confined strictly to the economic benefits and costs of introducing the euro and is not intended to examine its other possible impacts, including, for example, the implications for politics and national security. Adopting the euro will likely have a permanent impact on Hungarian economic growth. This impact will become evident through numerous channels. Bank staff have attempted to quantify and sum up the extent of this impact transmitted through the various channels. The findings of this analysis suggest that the introduction of the euro will bring about significant net gains in growth. However, welfare is influenced not only by the level and rate of GDP growth, but their stability as well. A widely fluctuating national income will produce lower welfare than a more stable one, even if on average the two income levels are identical. For this reason, it is important to examine whether joining the euro area will increase or mitigate the volatility of business cycles. In other words, the key question is whether Hungary and the euro area form an optimum currency area, that is whether the monetary policy of the euro area is capable of adequately substituting independent Hungarian monetary policy in smoothing out cyclical fluctuations. In the findings of this analysis, the euro area seems to be in most respects at least as optimal a currency area for Hungary as for less developed euro area member countries.currency union, convergence, monetary policy, fiscal policy.

A naperőművek nagykereskedelmi piaci árakra és a hagyományos technológiákra gyakorolt hatása Magyarországon

A tanulmány azt a kérdést vizsgálja, hogy a megújuló erőművek terjedése milyen hatást gyakorol a hazai nagykereskedelmi villamosenergia-árakra és ezen keresztül a hagyományos technológiák jövedelmezőségére. A régió más megújuló energiaforrásaival ellentétben a hazai naperőművi termelés esetében nem sikerült szignifikáns árhatást kimutatni. Az árak napon belüli mintázatát azonban megváltoztatja az erősödő naperőművi penetráció, de a déli órák árainak mérséklődését ellensúlyozza az esti órákban tapasztalható nagyobb áremelkedés. Akkor várható, hogy a naperőművi termelés nagykereskedelmi árakat mérséklő hatása a hazai piacon is érvényesüljön, ha sikerül az esti csúcsidőszakban kialakuló piaci szűkösséget mérsékelni. Ezt a keresleti rugalmasságot ösztönző szabályozások és a kínálat flexibilitását javító beruházási támogatások segíthetik. Journal of Economic Literature (JEL) kód: Q42

Case Studies on Impediments to Exports in Small Transition Economies

This series of enterprise case studies grew out from a 1995-1996 research project at IIASA. It acknowledged the importance of export development for the recovery of the economies of Central and Eastern Europe following their deep transformational recession in 1990-1994. The main goal was a systematic empirical analysis of the different kinds of impediments to exports in various small East European countries. The project included the coordinated elaboration of country studies for seven small transitional economies (Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Romania, Slovakia and Slovenia) and the writing of three topical studies. The authors of the country studies and the author of the topical study on Russia were requested to base their work on 20 enterprise case studies each (eventually the Russian study was based on 10 cases). Before the start of the research a common scheme of the enterprise case studies was discussed and agreed upon with the authors. After completing their work the authors were asked to supplement a short version of their case studies to their main text. Eventually it was decided that, due to the length of the full text, two related publications would be arranged, one book made up of the country studies and topical studies, and another of the enterprise case studies. The book was published by Edward Elgar: Cooper, R. and Gács, J. (Eds.) (1997) Trade Growth in Transition Economies: Export Impediments for Central and Eastern Europe, Edward Elgar, Cheltenham, UK. The second publication is the present series of case studies