The published studies in the December issue of our scientific journal are about the persistent Argentine inflation, Ireland's eurozone experience, the text analysis of central bank communications using artificial intelligence, inflation expectations of the Hungarian population, the relationship between ESG and corporate credit risk, and the effects of international geopolitical crises on the Hungarian stock market, while an essay reviews the changing global role of the dollar.
The comprehensive study of economic history by Mario I Blejer assesses the eight well-defined macrocycles that have affected Argentina over the past 70 years. The repeated failures to contain persistent inflation are not simply due to technical policy errors but also to the country's deep-rooted political and institutional rigidities. These have long constrained productivity and external competitiveness, and have created a self-reinforcing inflationary dynamic that has undermined the stabilisation efforts of successive governments. The study's messages hold useful lessons for all central bankers and economic policymakers.
Donal Donovan presents the positive and negative experience of Ireland as an enthusiastic founding member of the euro area. The study reviews the events leading up to, during and after the 2008/2009 crisis, within a broad economic historical context, with a particular focus on the impact of Ireland’s euro area membership and the lessons that can be drawn from this experience. It highlights that the serious economic policy mistakes of the Irish authorities may have stemmed in part from the implicit belief that euro area membership would act as a shield and prevent any major economic crisis.
Today, automated text analysis has use cases in many areas. One of these is the interpretation of central bank communication and the extraction of information from text data of announcements. The study by Zalán Kocsis and Mónika Mátrai-Pitz compares the performance of several methods in use in this field. Interestingly, the latest artificial intelligence (OpenAI GPT) models were found to be less accurate than previous-generation BERT models that underwent targeted training. However, both new GPT methods and older rule-based methods have several properties that justify their use in certain cases.
The study by Tímea Várnai and Áron Szakály points out that successive waves of inflation in the early 2020s changed the inflation expectations of the Hungarian population. During the high inflation period, fluctuations in food prices, changes in the EUR/HUF exchange rate and its volatility reflecting economic uncertainty, as well as the decline in the households’ confidence in the economy, strengthened the inflation fears of the households’ to a greater extent than during the low inflation period between 2015 and 2019. The anchoring of expectations has increased in importance.
The study by Boglárka Kiss, Dániel Homolya and György Walter presents the literature published between 2020 and 2024 and analyses, based on 61 relevant publications, how ESG factors affect corporate credit risk. According to the results, better ESG performance is typically associated with lower bankruptcy risk. The study also identifies areas of research gaps: the small and medium-sized enterprise sector, climate risks, the Central and Eastern European region and the examination of artificial intelligence-based methods hold significant potential.
The study by Attila Zoltán Nagy and Sándor Erdős examines how the Hungarian stock market reacts to 108 international geopolitical crises since 1991. Their event window and cross-sectional regression analysis show that the BUX typically reacts negatively and more sensitively than emerging markets, especially to events of European origin. The strongest effect occurs in the 0–10 trading days following the event. Market reactions are primarily explained by global volatility (VIX) and the BUX index’s return environment preceding the event, while other Hungarian fundamentals do not play a role.
The essay by Anna Naszódi reviews the changing global role of the US dollar, as reflected in the composition of central banks' foreign exchange reserves. Building on the findings of Kenneth Rogoff's book "Our dollar, your problem" published this year, the analysis maps the risks threatening the dominance of the USD, and then uses the analogy of a Hungarian stock swap deal and the change in the composition of reserves to analyse how the volatility of the USD's exchange rate could change if its weight in the reserves of the world's central banks continues to decline.
In addition to the above, the December issue of the Financial and Economic Review includes one book review and one conference report.
The new issue can be viewed on the website of our Journal:
The Financial and Economic Review
We wish you a very pleasant reading.
Editorial staff of the Financial and Economic Review/Magyar Nemzeti Bank