Inflation expectations in Hungary

The aim of this study is to provide an overview of the main characteristics of expectations of professional forecasters, households and firms in respect of Hungarian inflation trends. In countries where an inflation targeting regime is in place, inflation expectations are of key importance from the perspective of monetary policy and play a significant role in central bank decisionmaking and follow-up communication. The inflation expectations of economic agents are relevant for central banks for two main reasons. On the one hand, inflation expectations can provide direct information concerning the credibility of monetary policy. On the other hand, they may carry important information that can help central banks in forecasting macroeconomic developments. For the purpose of understanding and forecasting inflation developments, most central banks monitor the expectations of individual economic agents on a regular basis. Besides average expectations, the dispersion of inflation expecta tions may also contain significant information for central banks. For Hungary, inflation expectation data are available from surveys based on quantitative or qualitative questionnaires for households, firms and professional forecasters

A problémás projekthitelek portfóliótisztítása Magyarországon : A rendszerkockázati tőkepuffer mint célzott makroprudenciális eszköz tapasztalatai

A válságot követően a legnagyobb magyarországi bankcsoportok esetében az ingatlanfinanszírozáshoz köthető projektkitettség több mint 50 százaléka vált problémássá. A makroprudenciális kockázatok kezelése érdekében a Magyar Nemzeti Bank rendszerkockázati tőkepuffert vezetett be, amelynek mértékét a rendszerkockázathoz való egyedi hozzájárulás arányában határozta meg. A tanulmányban a rendelkezésünkre álló, szerződés szintű projektkitettség-adatbázisban fellelhető adatok alapján elemeztük ezen ügyletek bizonyos jellemzőit 2015 harmadik negyedévében, közvetlenül a tőkepuffer-előírás bejelentése előtt, illetve az intézmények alkalmazkodását 2017 első negyedévének végéig, amikortól a tőkepuffer megképzését előírták. Megállapítottuk, hogy a bankok jellemzően a nagyobb ügyleteiket tisztították, illetve nem azonosítható olyan indikáció, miszerint az intézmények inkább a nemrég késedelembe esett problémás kitettségeket preferálták volna a tisztítási folyamatban, sőt a tőkepufferrel előzetesen érintett intézményeket vizsgálva ennek ellenkezője látható. Az elemzés alapján az is megállapítható, hogy erőteljesebb tisztítás történt azoknál az intézményeknél, amelyeket a rendszerkockázati tőkepuffer a 2015 harmadik negyedév végi adatok alapján előzetesen érintett volna

Portfolio Cleaning of Problem Project Loans in Hungary : Experiences Related to the Systemic Risk Buffer, as a Targeted Macroprudential Instrument

After the crisis, more than 50 per cent of project exposures related to real estate financing became problem exposures at the largest Hungarian banking groups. With a view to managing macroprudential risks, the Magyar Nemzeti Bank introduced a systemic risk buffer, the rate of which has been calibrated in proportion to the individual contribution to systemic risk. In this paper, based on the data available in the project exposure database at contractual granularity, we analyse certain characteristics of these transactions in the third quarter of 2015, immediately prior the announcement of the capital buffer requirement, as well as the adjustment by the institutions until the end of the first quarter of 2017, i.e. the start date of the mandatory recognition of the capital buffer. We found that banks typically cleaned the larger problem exposures, and there is no indication that institutions gave preference in the cleaning process to problem exposures that defaulted more recently. In fact, when examining the institutions preliminarily affected by the announcement about the intended capital buffer quite the opposite was seen. The analysis also revealed that cleaning was stronger at those institutions which, based on the 2015 Q3 data, would have been preliminarily affected by the systemic risk buffer

Service traders in Hungary: Evidence from firm level data

The aim of this paper is to present new empirical evidence on the characteristics of service trader firms using a novel dataset for Hungary. In the period of slowing growth of goods trade, services, which are more resilient to cycles and are growing steadily since the crisis, might open new alternatives for foreign trade expansion. By using firm level data for the period 2006-2014, this paper documents a series of stylized facts as follows. First, services exporters or goods and services exporters (bi-exporters) are even fewer than goods exporters, but they are present in almost all major sectors of the economy. Even manufacturing firms trade in services. Second, average yearly export values are higher for bi-exporters, both in services and goods. Third, services exporters outperform goods exporters in various dimensions: they are larger in terms of employment, give higher wages, have higher labor and total factor productivity. The effect of exporting slightly differs by industries and it is more pronounced for SMEs than for large companies. Service traders increase their productivity before starting to export and increase it further after entering foreign markets. Lastly, there is also some evidence on switching trader status. Earlier services exporter status is positively correlated with future services exporter status and bi-exporter status, indicating that firms might be willing to diversify their export portfolio in the goods-services dimension and not only along product/service type and destination country, as documented earlier. Most of the above findings prevail for importing as well

The anatomy of consumption in a household foreign currency debt crisis

This paper studies the consumption response to an increase in the domestic value of foreign currency household debt during a large depreciation. We use detailed consumption survey data that follows households for four years around Hungary’s 2008 currency crisis. We find that, relative to similar local currency debtors, foreign currency debtors reduce consumption approximately one-for-one with increased debt service, suggesting a role for liquidity constraints. We document a variety of margins of adjustment to the shock. Foreign currency debtors reduce both the quantity and quality of expenditures, consistent with nonhomothetic preferences and “flight from quality.” We find no effect on overall household labor supply, consistent with a weak wealth effect on labor supply. However, a small subset of households adjusts labor supply toward foreign income streams. Affected households also boost home pro- duction, suggesting a shift in consumption from money-intensive to time-intensive goods

Spare tyres with a hole: Investment funds under stress and credit to firms

We study the impact of a liquidity shock affecting investment funds on the financing conditions of firms. The abrupt liquidity needs of investment funds, triggered by the outbreak of the Covid-19 pandemic, prompted a retrenchment from bond purchases of firms and a withdrawal of short term funds from banks, impacting firm financing costs directly via bond markets, and indirectly via banks. According to our results, the spreads of corporate bonds held by investment funds increased. Furthermore, an increase in the short term funding exposure of a bank to investment funds triggered a contraction in new loans to euro area firms. Overall, our results show that while non-banks in general support firm financing by acting as a spare tyre when banks do not, their own stress can trigger a contractionary credit supply effect for firms