The September 2022 Issue of the Financial and Economic Review Is Now Published

In the September issue of our quarterly, the Our Vision section examines digital central bank money. The published studies discuss the repricing of housing loans, the lapse rates of life insurances, fiscal episodes, and the impact of bargaining position on the contract. The feature articles present the advantages of central bank digital currency and the secrets of lasting economic success through the example of Switzerland and Denmark.

In their essay, János Müller and Ádám Kerényi examine the emergence and unstoppable rise of central bank digital currencies (CBDC) and the preparatory phase of their introduction. An urgent task for central banks is to ensure stability, sustainable development, competitiveness, and the effectiveness of monetary policy. In addition to the expected benefits of CBDC, the authors also analyse the risks. The appearance of CBDC in the international financial system presents a major challenge to global means of payment. The competition between the digital dollar, euro and yuan may change the positions of the global financial system. What is at stake is the restructuring of international power relations.

In the current monetary policy environment, a topical question is how quickly changes in interbank interest rates are reflected in the repricing of loans, since the speed of transmission plays an important role in the delay with which real economic agents perceive the central bank's actions. Gábor Hajnal and Csaba Lados investigate how many months it takes for changes in interbank interest rates to be reflected in the interest rates of newly disbursed housing loans. Based on their statistical estimate, changes in interbank interest rates are incorporated into interest rates in approximately four months; however, based on the banks’ announcements, they report interest rate changes of different speed and extent.

The study by László Szepesváry examines the lapse rates of certain life insurance policies in relation to economic and non-economic events, to find an answer to the question of how the changed yield and inflation environment, as well as closures due to Covid-19, had an impact on the cancellations of contracts. In the case of the investigated single premium investment-type insurance, the effect of certain changes in the interest rate level on the lapse rate can be detected (especially for the higher premium classes). This was not the case for the examined continuous premium insurances under review, and no significant relationship with lapses could be detected in connection with inflation or closures due to Covid-19.

It is known from the international literature that the basic statistics used for the analysis of fiscal policy and their simple corrections yield misleading results. Gábor P. Kiss therefore uses his own methodology. As a novelty, there is an opportunity for a comparable analysis of the adjustment taking place between 1994 and 1996, since the official statistics available until 1995 were traced back to 1994 as well. Through the new methodology, five more fiscal episodes can be identified until 2016, and in addition to a detailed breakdown of expenditure and revenue factors, it is also possible to present the macroeconomic situation that determines fiscal policy.

László Csorba shows that a credit institution with a strong bargaining position can come close to a perfect contract in the legal sense through the acquisition of additional rights with the loan agreement, since repayment is guaranteed in almost all circumstances. The study points out that enforcing the perspective of a perfect contract in the economic sense, which includes as many alternatives as possible for the future, can still significantly reduce credit risk. Through the joint application of the two points of view, credit institutions can avoid using their bargaining position excessively during the conclusion of credit agreements, creating possible future problems.

In his feature article, Balázs Kóczián analyses the effects of central bank digital currency, considered the payment instrument of the future. With the help of a new, interest-bearing tool that combines the favourable properties of cash and bank deposits with central bank security, the relationship between the public and the central bank is strengthened, and the impact of interest rate decisions becomes direct. Due to this, the central bank may achieve its goals more efficiently, competition in the banking system may be strengthened, and new innovative solutions may appear for users.

In their article, Rafael Lipcsey-Andersson and Szabolcs Szentmihályi present the factors that led to lasting economic success in the case of Switzerland and Denmark. Although there are plenty of similarities between the paths of the two countries, which can serve as a lesson for Hungary as well, different factors contributed to their success, which supported development based on the unique conditions of each country.

In addition to the above, the September issue of the Financial and Economic Review includes two book reviews and two conference reports.

We wish you a very pleasant reading.

Editorial staff of the Financial and Economic Review