22 December 2021
The essays on “Our Vision” in the December issue of our journal deal with the centripetal and centrifugal forces of the European Union, and the issue of the introduction of the euro as a reflection. The published papers discuss the corporate bond market, green bonds, the issue of financial exclusion, and a database on real estates. The feature articles deal with inflation, convergence and the insurance market.
In his essay, György Szapáry examines the challenges posed to the unity of the European Union by the economic crises of the 21st century. The initial strong centripetal forces are stretched by new, unexpected centrifugal forces. Can the EU face the unexpected challenges? There can be no strong, influential united Europe without a solution to the migration crisis agreed by all Member States, without a better coordinated fiscal and foreign policy, and without a clear and uniformly accepted interpretation guaranteeing the sovereignty of nation states.
The date of the introduction of the euro is a recurring issue due to the commitment of the Member States that have joined since 2004 and the biennial progress report. In the September issue, Péter Gottfried discussed when and how Hungary should join after we meet the criteria. Thinking further, according to Elemér Terták’s essay, it is worth dealing with these issues for two reasons: on the one hand, Croatia and Bulgaria, which joined to the EU later, will soon join the euro area, and on the other hand, Sweden, as an older EU member, is also obliged to join, meets essentially all the criteria, but does not intend to adopt the euro yet.
In their study, Attila Bécsi, Gergely Bognár and Máté Lóga present the growing importance of the corporate bond market. They point out that in a developed market, corporate bonds are a realistic alternative to raising funding in addition to bank loans and can also be effective as a tool for crisis management. The authors provide an overview of the development of international bond markets over the past two decades and why leading central banks have supplemented their unconventional monetary policy tools with corporate bond purchase programmes. They present how the MNB’s Growth Bond Programme launched in 2019 helps the Hungarian market to catch up regionally.
Sustainable investments are an important tool for financing the challenges posed by climate change. Some investors are willing to sacrifice part of their return in favour of environmental goals by paying a kind of “green” premium. The study of Emilia Németh-Durkó and Anita Hegedűs supports the existence of greenium, but the Sharpe and Sortino ratios also show a continuous improvement in the average financial performance of green bond funds. The authors found that a green strategy could also benefit investors, as in the last year of the study, in 2020, green bond funds outperformed the market and the greenium disappeared.
Márta Somogyvári’s study points out that the socially and financially vulnerable groups in society often do not have access to digital payment options. The main factors determining the resulting financial exclusion include the difficulty of economic and intellectual access, the low level of digital and financial literacy, but also the business policies of banks. Subsidising digital access, various educational programs, and developments that replace face-to-face contact with artificial intelligence can help to reduce financial exclusion.
The application of statistical value estimates in retail lending can reduce its costs and speed up the process for all concerned significantly. However, without adequate data, their accuracy can be questioned. The available Hungarian databases are fragmented and limited, therefore in their study, Gabriella Grosz, Evelyn Herbert, Gábor Izsák and Katinka Szász propose to create a central database in which the data are available uniformly and up-to-date, facilitating the dissemination of statistical estimates, which also supports the further expansion of digitalisation in addition to strengthening banking competition.
In his feature article, András Balogh examines the factors that contribute to the development of high inflation, especially the role of economic policy, through examples taken from economic history. The paper also briefly introduces an emerging economic approach, the modern monetary theory, pointing out its messages on inflation.
Analysing the Czech economic development, Zsolt Becsey Jr. and Áron Máté point out that the source of growth in the last 20 years was the improving labour market and the favourable investment rate. Growth was supported by, among other things, high domestic ownership, digitisation, a healthy regional structure, and investment in human capital.
In their essay, András G. Szabó and Nagy Koppány present the situation, the size and recent developments of the Hungarian insurance sector. They cover the effects of the pandemic and outline possible growth trajectories for the future, highlighting the growing role of insurers as institutional investors in financing public debt and the economy.
In addition to these, the December issue of the Financial and Economic Review contains two book reviews and two conference reports.
This publication is available on the website of the Financial and Economic Review:
We wish you a pleasant reading.
Magyar Nemzeti Bank