Optimal Indebtendness of a Small Open Economy with Precautionary Behavior

The model is an application of the precautionary consumer saving model to the external debt policy of a small open economy. Let us assume that the welfare criterion of macroeconomic policy is the utility function of a representative infinitely living dynasty. This approach is in line with the intertemporal optimization model of the current account of Obstfeld-Rogoff [1995]. It is known that assuming differences in tastes or growth rates across countries imply unacceptably extreme long-run predictions in this model. We show that a model with uninsurable wage risks and precautionary behaviour leads to stable stationary indebtedness levels within the range of magnitudes observed in reality. Let us assume that the consumption function of the representative dinasty has the form of a CES function. The positive third derivative of this function and uncertainty together give rise to a precautionary behavior. As a result, countries who grow fast relative to their own time preference, will borrow, but their debt will be constrained by the risk that indebtedness implies. By similar reasoning, a patient or slow-growing country will lend but its lending will converge to an amount where the gained security that its reserves offer is equal to its opportunity cost. We parameterized the model assuming a drifting random-walk aggregate income with a standard error of 2%, a habit factor of 80% of the previous years income incorporated into the CES funtion, risk-aversion and time preference parameters taken from the literature, and found that typical indebtedness ratios observed in the world can be replicated as a policy outcome of our model, in contrast to deterministic models where the rate of the optimal indebtedness was in the range of 20-30 times GDP. The calculations are based on adaptation of the Taylor-series approximation of Skinner [1989]. A sensitivity analysis of the stationary solution to various parameters and various scenarios for effects of assumed shocks and consequences of catch-up growth paths for a converging country are calculated. In another section the problem is discussed whether the level of indebtedness can be considered a goal of macroeconomic policy and if it was a goal how could it be achieved. Let us assume agents with idiosynchratic uninsured wage risks. These risks are correlated but there exists an aggregate risk for the country as a whole. Aggregate risk has to be handled by macroeconomic policy. The optimum intertemporal consumption choice of the social planner (macro-policy maker) does not necessarily coincide with the sum of the optimal decisions of individual agents. Fiscal policy is the tool that creates consistency between the two. It is shown that the model with the parametrizations given above and a proportional income tax system implies that government debt nearly fully appears in external debt, i.e. Ricardian compensation is very close to 0. This means, that the fiscal tool is effective in enforcing the social optimum of indebtedness.

Modern Bayes-i ökonometriai elemzések. Simasági priorok alkalmazása az üzleti ciklusok szinkronizációjának mérésére és az infláció előrejelzésére

Az értekezés I. fejezetében a modern Bayes-i ökonometria alapvető elemzési eszközeit ismertettem, köztük a szimulációs eljárásokat, melyek az utóbbi évtizedben forradalmian megújították a Bayes-i elemzéseket. Ezek a szimulációs eszközök a magyar ökonometriai-statisztikai irodalomban kevéssé ismertek, ezért ez a fejezet – miközben a tézis többi fejezetében alkalmazott módszereket is felöleli – egyben hiánypótló ismeretterjesztést is célul tűzött ki. A fejezet felépítése alkalmas arra, hogy egy féléves bevezető Bayes-i ökonometria kurzus ismeretanyagául szolgáljon. Az értekezés II. fejezetében a hagyományos, egész értékű rendre értelmezett késleltetés operátor időben változó tört késleltetésekre való kiterjesztésével rendkívül rugalmas idősorelemzési eszközt mutattam be, melynek felhasználásával az idősorelemzésekben az időben változó késleltetési struktúrát is modellezni lehet. A tört késleltetés felhasználásával olyan modellkeretet vázoltam, amelyben az időben változó paraméterek külön-külön mérik a változók együttmozgását illetve fáziskésését. A modell együtthatóit simasági priorok felhasználásával, Bayes-i technikával becsültem meg. A modell alkalmazásaként az üzleti ciklusok közti szinkronizációt vizsgáltam, egyrészt mesterségesen generált adatokon, másrészt 24+1 ország valós GDP adatain. A vizsgálatba bevont országok a következők voltak: Kelet-Közép Európai országok: Csehország, Észtország, Lengyelország, Lettország, Litvánia, Magyarország, Szlovákia, Szlovénia; Gazdasági és Monetáris Unió országai: Ausztria, Belgium, Franciaország, Finnország, Görögország, Hollandia, Németország, Olaszország, Portugália, Spanyolország; és végül a vegyes Kontrollcsoport, amelyben szerepelnek nem-GMU tag EU államok, mint Dánia, Svédország és Egyesült Királyság; további európai államok, mint Norvégia és Svájc; illetve USA és Japán, melyek a világ másik két gazdasági övezetét reprezentálják, továbbá +1, "referencia országként" a Gazdasági és Monetáris Unió országainak aggregátuma. (...

Disaggregated Cost Pass-Through Based Econometric Inflation-Forecasting Model for Hungary

This paper presents one of the inflation forecasting models used by the Magyar Nemzeti Bank in its recent inflation forecasts. The model attempts to integrate all the properties of the former models considered by the author as being advantageous and desirable into a unified framework. Thus, this model is based on disaggregated econometric estimates, complemented by expert assumptions. The model explains the prices of marketed goods using their cost factors, capturing an assumed process whereby costs gradually pass through into consumer prices. It is the empirical estimation of this slow cost-price pass-through that provides the uniqueness of the model in terms of economic and econometric theory.Bayesian Econometrics, Inflation, Forecasting model, Pass-through.

Régi paradigmák, új lendület: A magyar gazdaság növekedési képességének megerősítése = Old paradigms, new impetus: Strengthening the growth potential of the Hungarian economy

Az alacsony bérköltségre alapozó versenyképességi megközelítés mindinkább a magyar gazdasági felzárkózás akadályává válik. Az Európai Unióhoz 2004-et követően csatlakozott tagállamok felzárkózási versenyében Magyarország az 1995- ös, és egészen 2005-ig megtartott előkelő harmadik helyről 2012-re a hetedik helyre csúszott vissza. Ennek oka nemcsak a megbomló egyensúlyi folyamatok hosszan--- The low-cost competitiveness approach overemphasized in the past increasingly becomes a barrier to economic convergence in Hungary. In the convergence competition of the Member States that joined the European Union after 2004, Hungary moved from the top third place held in 1995-2005 period to the seventh place by 2012. This fallback is a consequence of the long-term burden of disruptive disequilibrium processes and the growth model followed. As for growth factors, the focus is currently shifted from quantitative indicators to quality indicators in the world. New steps need to be taken to strengthen competitiveness and hence growth capability that breaks the low-cost approach of the 1990s. A theory becoming more pronounced in recent years points to the fact that the increase in labor income is positive for improving economic performance in many cases. In the spirit of this idea, a six-year tax and wage agreement was concluded in November 2016. As a result of this agreement, the convergence of wages accelerates and the entrepreneurial tax burdens will be reduced strengthening the competitiveness and the growth capacity of the Hungarian Economy

Analyzing Fiscal Policy and Growth with a Calibrated Macro Model

CEE countries experience a catching up period in economic growth while preparing for accession to the European Union. In several countries we experience an expenditure boom arising either from exuberant expectations of consumers towards EU or EM or a fiscal deficit usually underpinned by an argument that a reallocation of total consumption at the expense of the future is a result of intertemporal optimization. The paper analyses whether this argument is justifiable. The key factors that influence the intertemporal trade-off are country risk and externalities from foreign direct investments. High indebtedness increases macroeconomic risk and discourages investments. If investment externalities exist the investment gap may cause high output loss. With careful calibration of the parameters determining the risk premium and the external effects of FDI the model predicts a 20% annual return of fiscal austerity at the macro level. This number is too high to be justifiable by any reasonable rate of time preference.Catching-up, Risk Premium, FDI, Consumption boom, Simulation.

The link between EU households’ digitalization and growth factors. What does data (not) reveal?

Households supply the workforce for the modern economy, increasingly based on information and communication technology (IT). The access of households to e-devices and e-channels has been continuously growing in the last two decades. The aim of the study is to reflect these theoretical concepts with databased, econometric causality analysis. Specifically, this study investigates whether the digitalization of households is a factor in their macroeconomic and behavioural indicators. In other words, does households’ access to digital devices and channels determine rates of employment, productivity (TFP), level of savings, disposable income, per capita GDP or the growth ratio of GDP, and even such institutional indicators as political stability? The methodology employed is panel Granger causality analysis and Dumitrescu-Hurlin test, and the regional scope is the EU. Causality is tested between the households’ digitalization and their macroeconomic, consumer behaviour or institutional indicators using panel Granger causality tests