The Our Vision column in the June issue of our scientific journal reviews the challenges facing Hungarian monetary policy. The published studies are about sustainability metrics, deglobalisation and decoupling, Hungarian innovative companies, and investment methods. An essay presents the fragmentation of the international financial system. The feature articles examine the issues of EU enlargement and a stabilisation mechanism, as well as the Bretton Woods system.
Climate change, demographic trends, geopolitical tensions and growing budget burdens are among the most important challenges of the 21st century. For each individual, each institution, and each country, these processes represent a problem to be solved from different aspects. In addition, however, it is generally true that finding suitable solutions is becoming more and more pressing. The essay in Our Vision column by András Balogh, Zsolt Kuti and Annamária Sipos-Madarász examines the challenges in a central bank context, analysing the processes primarily from the perspective of Hungarian monetary policy.
Nowadays, it is becoming increasingly obvious that in order to achieve long-term sustainable development, it is essential to rearrange our socio-economic systems to prioritise the environment. Following Stiglitz, it can be stated that what we measure affects what we do. For this reason, sustainability as a basic principle needs to be included in the indicators on the basis of which we determine the effectiveness of our actions. With this in mind, in their study Csaba Kandrács and Renátó Ritter review the indicators that have been published so far to measure sustainable development, outlining the theoretical framework of sustainability, distinguishing between weak and strong sustainability.
We are witnessing a transformation in global trade: the narratives of deglobalisation and decoupling have been reinforced by a multitude of shocks (such as the Covid-19 pandemic and the war in Ukraine). In their paper, Tamás Ginter and Patrik Tischler analyse trade flows of the Visegrád countries and the effects of recent shocks. The results show that between 2019 and 2022, deglobalisation tendencies were not persistent in the region. While trade with Russia has declined after the escalation of the war in Ukraine, the region has not started to decouple from the Chinese economy.
Innovation-driven companies are a subgroup of innovative companies that have carried out their innovative business activities with rapid sales growth. The research by Mihály Szoboszlai, Tímea Várnai and Áron Szakály examines the nature of rapid growth among Hungarian innovative companies in a regression model framework using questionnaire data. According to the results, the factors supporting rapid growth in this priority segment include: high technological and human resource standards, export intensity and access to venture capital.
Taking advantage of the stock market’s risk premium (i.e. stocks outperform bonds) is considered one of the most important investment principles. Although the premium is positive in many countries based on historical data, the risk of holding stocks increases for 30 years and only drops to zero after 100 years. In addition to traditional methods, market timing strategies can also provide a solution to this problem. Attila Zoltán Nagy examines one of these types, timing based on simple moving average signals, on the Budapest Stock Exchange Index for the period 1998–2022, with 4,619 parameters and 554,935 trades.
In their essay, János Müller and Ádám Kerényi write about the challenge of our time, the change in global power relations. As a result of geopolitical tensions and armed conflicts, a multipolar world order is emerging, and the international financial system is fragmenting. Its tool is financial bloc formation and dependence. Global blocs introduce import restrictions, trade and financial sanctions. Financial market uncertainty hinders international capital flows and capital allocation. Financial market volatility is increasing, endangering monetary stability. The aim of the blocs is to increase their influence, protect their sovereignty, and strengthen international financial regulation.
The next enlargement of the EU would increase the differences between the current and potential new members, but also between the candidate members, to a greater extent than ever before. This is exemplified by the fact that Ukraine’s size necessitates a review of the EU’s current common policies, while this is not justified in the case of the Western Balkan candidates. Péter Gottfried’s feature article explores what would be the optimal sequence and logic of actions from the point of view of the EU.
A fundamental characteristic of a well-functioning economic and monetary union is the ability to smooth out asymmetric economic shocks. This question has been a concern of the economic community for a long time and several proposals have come to light. At the level of countries, unemployment benefit systems play the role of automatic stabilisation. The feature article by Márk Donát Kiss and György Szapáry also takes unemployment as a basis. Its novelty is that it proposes an automatic stabilisation mechanism for the eurozone, which is based on excess unemployment and does not replace the national systems, but an additional top-off system could be introduced. In this way, structural unemployment differences between countries can be eliminated.
The main statement of Ágnes Solti’s feature article is that the leading role assumed in the establishment of a global monetary regime after World War II had an outstanding importance in the implementation of the long-term foreign economic strategy of the US. The article also highlights the factors that still influence the functioning of the world economy, despite the suspension of the Bretton Woods regime.
In addition to the above, the June issue of the Financial and Economic Review includes three book reviews and a conference report.
The publication can be viewed on the website of our Journal:
https://en-hitelintezetiszemle.mnb.hu/
We wish you a very pleasant reading.
Magyar Nemzeti Bank