Consequences of global imbalance corrections for Hungary

There are numerous signs of the emergence of global imbalances in world economy. This is reflected by the fact that of the developed countries the USA is producing a substantial, historically unprecedented magnitude of current account deficit vis-a-vis the current account surplus of a well-defined group of mainly emerging countries and of some developed countries. This is probably not an optimal situation, and in the course of solving this problem there is the question of what impacts the Hungarian economy may be exposed to and what steps Hungarian monetary policy can take. In examining the various scenarios of global adjustment, it is important to distinguish between an adjustment originating in Asia or in the USA. The former stimulates the Hungarian economy, while the latter temporarily hinders the Hungarian economy. A correction triggered by the markets has stronger output consequences for the Hungarian economy, than that of a restrictive fiscal policy in the USA. Hungarian monetary policy has an effect on whether output or inflation will become more volatile. Hungarian monetary policy tracking the ECB involves higher fluctuations in inflation and lower changes in GDP, whereas the situation is just the opposite in case of independent policies. If the exchange rate of the forint weakens due to a decline in global risk appetite, this would initially result in growing inflation, although over the longer term even lower GDP and inflation cannot be ruled out either.global imbalance, current account adjustment, forcasting, simulation.

The bilinear-biquadratic model on the complete graph

We study the spin-1 bilinear-biquadratic model on the complete graph of N sites, i.e., when each spin is interacting with every other spin with the same strength. Because of its complete permutation invariance, this Hamiltonian can be rewritten as the linear combination of the quadratic Casimir operators of su(3) and su(2). Using group representation theory, we explicitly diagonalize the Hamiltonian and map out the ground-state phase diagram of the model. Furthermore, the complete energy spectrum, with degeneracies, is obtained analytically for any number of sites

Forecasting Inflation - A Case Study on the Czech, Hungarian, Polish, Slovakian and Slovenian Central Banks

The paper examines the inflation forecasting practice and the related institutional framework at the central banks of five Central European countries (the Czech Republic, Hungary, Poland, Slovakia and Slovenia). The first part of the paper presents the general aspects of the comparative analysis, which primarily follow the requirements of inflation targeting monetary regimes. The second part consists of individual country case studies, which give detailed description of the institutional framework and forecasting practice at the five central banks considered.

Thermal behavior of native, washed and steam exploded lignocellulosic biomass samples

The aim of this study was to evaluate the chemical changes in the main components (cellulose, hemicellulose and lignin) of various lignocellulosic biomass samples during the steam explosion pretreatment. Pyrolysis-gas chromatography/mass spectrometry (Py-GC/MS) and thermogravimetry/mass spectrometry (TG/MS) measurements have been performed on different native, washed and steam exploded woody (willow and spruce) and herbaceous (hemp, wheat straw and sweet sorghum bagasse) biomass samples. The main differences between the thermal decomposition of the samples are interpreted in terms of the altered structure of the biomass samples by the effective steam explosion treatment and the different alkali ion contents which have been determined using inductively coupled plasma-optical emission spectroscopy (ICP-OES) method. In order to separate these two effects, the native biomass samples have been washed with hot water to remove the main parts of the potassium and sodium ions. The concentration of K+ and Na+ has been reduced in the treated biomass samples so the thermal decomposition mechanism has been altered due to the elimination of the catalytic effects. Principal Component Analysis (PCA) has been used to find statistical correlations between the data. The functional group compositions of the lignin molecules have been modified significantly as indicated by the pyrograms and the score plot of the PCA. The amount of hemicellulose has been reduced. On the other hand, the relative amount of the structurally modified cellulose has been increased in the samples by the steam explosion pretreatment step

An estimated DSGE model of the Hungarian economy

This paper presents and estimates a dynamic stochastic general equilibrium (DSGE) small-open-economy model for the Hungarian economy. The model features different types of frictions, real and nominal rigidities which are necessary to replicate the empirical persistence of Hungarian data. Bayesian methods are applied, and the structural break due to changing monetary regime over the studied period is explicitly taken into account in the estimation procedure. A real-time adaptive learning mechanism describes agents’ perception on underlying inflation. This creates an additional inertia in inflation. We describe the properties of the estimated model by impulse-response analysis, variance decomposition and the analysis of identified structural shocks. Our results are compared with that of estimated euro-area DSGE models, and estimated non-DSGE models of the Hungarian economy. As a robustness check, a model without real time adaptive learning is also estimated and it’s results are also compared to those of the original model.New Keynesian models, DSGE models, small open economy, Bayesian econometrics.

A Structural Vector Autoregressive (SVAR) model for the Hungarian labour market

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.Bayesian, VAR, employment, inflation, wage, labour economics

Hungary in the NIGEM model

This paper presents a nationwide economy model for Hungary used by the National Bank of Hungary for analyzing the effects of world shocks, for quarterly forecasting exercises and other policy simulations. The study has two main goals: Firstly, we present the model for the Hungarian economy, developed in collaboration between the National Bank of Hungary and the National Institute of Economic and Social Research. The model is a one-sector aggregate economy model with a theoretically consistent supply side. A particular role is given to foreign direct investments in explaining the sources of growth both in the production process and foreign trade. Secondly, there is a brief discussion of the National Institute’s Global Econometric Model (NIGEM), to which the Hungarian model is linked. In this setup, we are also able to analyze the effect of world shocks on the domestic economy. For testing model properties, we present policy simulations for various shocks. A case study on the effect of the Russian crisis on Hungary is also discussed for the purpose of testing parameter adequacy.

Determinants of Real Exchange Rate Fluctuations in Hungary

This paper investigates the different sources of real exchange rate fluctuations in Hungary. We consider the effect of tradable pricing behavior and nominal rigidities in tradable real-exchange rate movements, and investigate the importance of relative productivity changes between the tradable and nontradable sector in relative price (nontradable/tradable) adjustments. We formulate a policy reaction function to separate the effect of tradable pricing shocks from policy shocks. The framework we use is a two sector open economy real exchange rate model. Its contemporaneous structure is used for the identification of structural shocks. Since the effect of policy shocks on tradable real exchange rate was not significant, our results suggest that nominal rigidities did not play an important role during the period under consideration. The evolution of nontradable prices and relative (nontradable/tradable) prices were well explained by nontradable output shocks. Thus, the Balassa-Samuelson-effect seems to have been at work in Hungary during the first eight years of transition.

Potential Output Estimations for Hungary: A Survey of Different Approaches

This paper is a comprehensive analysis of Hungary’s potential output. Since the concept of potential output is not unique, we present various interpretations of potential GDP, along with a large set of techniques for estimating it. Various estimates are presented and robustness analyses are performed. Finally, an illustrative scenario is outlined for the forthcoming few years.potential output, output gap, production function, business cycle, filtering.