Külgazdaság 7-8/2023

Analysis of the Hungarian SME structure by circular statistics tools


Domestic SMEs give much more weight to local factors in their location choices than large companies. The study investigated whether the structure of the domestic SME space can be captured by a geographical distribution according to compass points. Hungarian studies on this topic mainly use a gravity model, which most often can only represent a single force vector, although the number of vectors is infinite, only the magnitude of the force varies. To represent all directions, a circular statistical tool was used that is less well-known in the Hungarian economic literature and financial data of Hungarian SMEs were analysed. This method allows to capture a new dimension of the domestic economic spatial structure that is not possible with other methods, thus opening new analytical perspectives. The results show that, starting from the centre of Hungary, the spatial structure of SMEs is dominated by a north-south counter-pole rather than an east-west one, as several Hungarian spatial structure researchers have suggested. This can be explained by the fact that the capital city, when viewed from the centre of the country, results in a north-west concentration, which is prevalent in most SME segments. The northern dominance of circular distributions is also prevalent when Budapest is removed from the sample, which further reinforces the north-south polarisation phenomenon. This configuration is modified only in a few sectors, such as accommodation services, where specific geographical considerations determine the choice of location.




De-globalisation and changing value chains? An interpretative experiment in the context of technological cycles


Global value chains are estimated to account for 30-50 percent of world trade. These networks have become a prominent organisational model in the context of globalisation. The speed of their expansion has been marked not only by the growth of world trade but also by the growth of foreign direct investment flows. Both processes came to a halt after 2008. Some argue that this indicates a reversal in the process of value chains and globalisation. Others see only a slowdown. This paper argues that the transformation of global value chains has remained limited despite the economic shocks and policy shifts after 2008. The change in the trend of the data series has been at least as much influenced by the emergence of a new internet-based economic paradigm. The main business model of the new paradigm is no longer the traditional global value chain, but the platform economy. Its expansion is not linked to an increase in world trade or foreign direct investments. This argument is also supported by the fact that the decline in value chain indicators is mainly observed in the US economy. This is where the new technical-economic paradigm is developing fastest, with most platform-based firms being American.



State-driven electromobility: the role of the state in the development of the EV industry in China


The study examines the role of the Chinese state in shaping the competitiveness of the electric car industry. Recognising the unsustainability of resource-intensive growth and the domestic economic growth based on it, the Chinese state is actively supporting emerging industries to promote the green transition. The electric car industry is a good example of these efforts. Drawing on theories of ecological modernisation and state industrial policy, this paper presents China’s policies and plans to promote the development of this industry. The cooperation between state and industry in the field of electric automobiles (EA) will allow economic prosperity to remain the cornerstone of the Chinese Communist Party’s performance and legitimacy, while reducing the environmental burden of China’s economic rise and contributing to the country’s global competitiveness, all in a technology-intensive industry. The study provides data on several companies, but also uses the example of one company – BYD – to demonstrate the functioning of the Chinese support system and the wider situation of the Chinese EA industry. It suggests that the Chinese state is seeking global leadership and dominance of the entire value chain by seeking out the strongest players in the domestic market, regardless of their ownership structure, then selecting and subsidising the strongest ones, but phasing out these subsidies over time to avoid rent-seeking behaviour.


Adjustment with lags: the Hungarian economy in 2020 through 2023 and



The performance of the Hungarian economy has widely fluctuated since 2019 due to external components but mainly for policy-related reasons, and factors related to structural rigidities. The analysis covers the potential evolution of relevant external conditions and the inner drivers of the hungarian economic trends. Politicking and regulatory interventions have delayed the economy’s reactions to major changes, thus imbalances have grown large, compared to the region, in recent turbulent years. The increasing share of capital- and material-intensive businesses has resulted in a structure that compromises the speed and timeliness of adjustment processes. A highly critical issue of the post-2023 period will be the capability of Hungary, with its evolving economic structure, to adjust to the new normal in European macroeconomics as well as to face emerging technological, geopolitical, climatic, and social challenges.


Review on the book of

Péter Ákos Bod: Economic development and knowledge. Essay on the links between business culture, values, and education (Gondolat Publishing House, Budapest, 2023, 200 pages)


In the book, relying on his previously published articles on the subject, the author explores the factors of economic catching-up with the developed Western countries. Even the articles, published several decades ago, are strikingly timely. The key finding of the volume is that the success of a country’s catching-up efforts is determined by the social embeddedness of civic values and the development of human capital.


The investment and export promotion strategy of East Central Europe, with regard to its changing legal environment


As a result of the increased EU competence under the Lisbon Treaty and the Court of Justice of the European Union’s decision in the Achmea case, which has a Slovak dimension, on 6 March 2018, international investment protection law is undergoing a significant change in the EU context, with implications for economic policy in all member states. This paper analyses the EU regulatory environment affecting the investment promotion and protection strategies of Hungary, Poland, the Czech Republic and Slovakia from a legal perspective. These Central and Eastern European countries are also members of the Visegrad Group, and the extent to which the interests of this sub-regional group of countries have been and can be pursued under EU regulation is examined.

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Külgazdaság Vol. 5-6/2023

The European integration of the Western Balkans: business opportunity or economic challenge?


The aim of the study, based on a complex indicator developed by the authors, is to examine the evolution of the economic integration maturity of the Western Balkan countries between 2006 and 2020. The main conclusion is that, although the candidate countries have improved their economic integration maturity over the period, their performance is below that of Croatia, the benchmark for the former accession. This calls for further reforms in the candidate countries. The study is a valuable contribution to the relevant body of the knowledge of the subject, as no similar analysis has yet been carried out in the domestic or international literature. The introduction of a composite indicator is a new academic element, which allows the economic preparedness of the countries under scrutiny for EU accession, including the business environment, to be measured in a quantitative and comparative way. Despite its widespread application, a composite indicator has not been used in this form to measure economic integration readiness by introducing a benchmark country. The research results support and complement the current enlargement strategy of the European Union in a quantitative approach. The results can also provide an objective basis for developing and supporting business and economic policy decisions.


Transforming objectives – changing implementation frameworks.
Dilemmas of support for environmental public goods and the move towards renationalisation in the EU’s Common Agricultural Policy


The European Union’s Common Agricultural Policy must constantly adapt to changing economic, social and environmental needs. Due to this phenomenon, the objectives and conditionalities of the subsidies have undergone several major transformations over the past decades. The article seeks an answer to the dilemma of how far the EU-level support system, which pursues increasingly complex goals, and especially the focus on the provision of environmental public goods, would justify the return of agricultural policy planning and financing tasks to a certain extent to the level of the member states. Due to the more efficient achievement and financing of the objectives, the possibility of renationalisation may arise as a feasible reform direction. At the same time, concerns can be expressed regarding renationalisation, especially in the field of environmental and climate measures, where the support and implementation of common strategic goals is necessary. In the article, the authors analyse in detail the political economy of the transformation of agricultural policy objectives and the current operating framework of the support system. Desirable further changes are evaluated in the light of the new approaches appearing in the regulatory framework introduced from 2023 and the considerations supporting more efficient financing.


App economy: exploring the mobile app ecosystem


The mobile app market has been evolving since its birth in 2008. This study focuses on the microeconomic factors of the mobile app ecosystem through international research results. The paper can be considered a gap-filling study in the Hungarian literature. It provides an overview of the players in the app economy (users, developers, and app stores) and the relationships between them. It identifies the characteristics and success factors of the goods produced in the ecosystem. Mobile applications can be grouped according to several aspects (technological, motivational, purpose of use, business model) depending on the socio-economic benefits to be achieved. The market is typically flexible and responsive to rapidly emerging and abruptly changing trends. This characteristic makes it easier to enter the market than to compete effectively. The study highlights the potential of the app economy and shows why other, larger business sectors find it profitable to invest in app development.


The world’s most valuable education technology companies


The years of the global coronavirus epidemic have created an exceptionally favourable environment for educational technology (edtech) startups. For educational institutions and companies, the importance of the online tools they can use to transfer knowledge has increased. In the last two years, the number of private start-ups providing education-related services has nearly doubled, with a market value of more than one billion dollars (unicorn start-ups). This paper looks at three areas. The first is the distribution of edtech unicorns in the world’s top startup ecosystems. Although the US has traditionally had a strong innovation environment, China has more unicorn startups in the field of education technology. India is the third most powerful actor in the international ranking. The second is the role of business model innovation in the growth of edtech unicorns: how they have been able to adapt to a rapidly changing environment. The third is the emergence of technology giants (Big Tech) as new participants in the edtech market. The exceptional growth opportunities of recent years have been accompanied by strong development pressures, increased competition, and the emergence of new competitors.


Breaking the bank-guarantee independence


Guarantees, in terms of bank-guarantees rendered by financial institutions are deemed efficient and independent personal securities in international transactions. The usage of bank-guarantees created by the International Chamber of Commerce is a relatively recent, no more than 50-year-old customary law. Due to its relative immature nature, it frequently conflicts with the 2000-year-old the guaranty (bond) and the 150-year-old documentary credit whose rules are applied for its hiatus. The bank-guarantee is the guarantor’s own independent payment or performance obligation that is completely separated from the secured transaction. The guarantee is favoured by trading companies because it can efficiently protect their interests, provided that the text of guarantee-letter does not contain any contradiction or hidden connection with the underlying contract. The new usage of ICC on International Standard Demand Guarantee Practice (ISDGP) published in 2022 has strengthened the safety of guarantee, therefore its knowledge is indispensable for a successful “demand.” The lawmaking power of usages has been acknowledged and underscored by two judgments that were recently made and widely interpreted. The article pays attention to the examination, checking and interpretation standards which the ISDGP – after having uniformized the international banking practices – lays down. Since the independence of guarantees is warranted by the lack of secondary nature, the most critical point in its application is the text of guarantee obligation. By analysing the two lawsuits, this article points to the importance of the accurate wordings of independent personal securities and to the fact that autonomy principle of documentary credit is also not in harmony with the abstract nature of guarantees.

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Külgazdaság Vol. 3-4/2023


Economic analyses in Spring 2023

Külgazdaság has been publishing forecasts and analyses by economic research institutions, including the outlook of the National Bank of Hungary, since 2001. This year, we asked our regular contributors to reconsider, whether the tools used to curb inflation, including central bank rate hikes, are driving economies recovering from the shock of the coronavirus epidemic into recession – globally and locally. The official forecast of the European Commission struck a cautious but optimistic note: 1“Despite exceptional adverse shocks, the EU economy avoided the fourth-quarter contraction projected in the Autumn Forecast”, predicting GDP growth rates of 0.8 percent in 2023 and 0.9 percent in the euro area, with the inflation rate easing from 9.2 percent last year to 6.4 percent in the member states and 5.6 percent in the euro area. Hungary, however, has not avoided a technical recession, but is facing exceptionally high inflation in the European Union, which the National Bank of Hungary is also trying to contain with record high interest rates. The government’s aim is to avoid recession, while bringing inflation down to single digits by the end of the year. Our authors have undertaken to compare hopes with reality. Their analyses were submitted between 9 April and 20 April 2023

Budapesti Corvinus University:

The Hungarian economy amid recessionary worries, with gradually improving indicators of imbalances


The Hungarian business cycle slipped from an overheated phase to a slight recession after mid-2022 with the economy experiencing a change from a large positive GDP-gap into a similarly significant negative GDP-gap, as turns in the political business cycle allowed a restrictive economic policy stance. Clear indicators of deteriorating inner and external imbalances, such as inflation rate and twin deficit, still call consistent stabilisations stance throughout 2023. Assuming away from further shocks in external economic conditions and in geopolitics, flat Hungarian economic growth as well as material improvement in trade balance is forecast, with the headline inflation to be gradually reduced from its early 2023 peak, still staying above CEE average. Such near-recessionary economic path with negative real wages, a certain increase in unemployment rate, and growth performance falling behind those of regional peers, may trigger further policy debates between fiscal and monetary policy makers, particularly if a segment of Hungarian policymakers wanted to counter stagflation risks by administering growth promoting measures under the political slogan of reindustrialisation of Hungary. In the latter case, GDP growth would slightly surpass our main scenario in 2023, at a cost of deepening imbalances, with dire consequences for later years.

GKI Economic Research Co.

0.5 percent decline and 19 percent inflation expected this year


In 2022, Hungary was in a technical recession, facing severe imbalances and being isolated internationally. There are significant global political and economic uncertainties with the Russian-Ukrainian war, the adjacent energy crisis (in terms of security of supply and prices) and the impact of the international banking crisis this year on financial and real economic developments. The extent and timing of Hungary’s access to EU transfers could be better. The GKI’s forecast differs from the current majority view in its assumption of a downturn this year and a slower decline in inflation, as well as in the extent of the likely delay in access to EU transfers. Underlying these considerations is the assumption that the government’s political and economic policy thinking is changing at the tactical rather than the strategic level.

Kopint-Tárki Institute for Economic Research Co.:

Slight downturn, slowly receding inflationary pressure


Most likely the feared recession can be avoided this year, but at the cost of inflation remaining relatively high. The global growth rate will fall short of three per cent this year, and foreign trade in goods and services is also growing only modestly. Price increases are easing somewhat, but higher interest rates curb inflation only slowly. Core inflation rates are still increasing, suggesting that it will take time until the declining trend of energy prices becomes manifest in goods prices. Meanwhile, the pace of central banks’ interest rate adjustments could slow or even stop. EU GDP may expand by 0.9 percent this year, with some pick-up next year, but we do not expect the growth rate to surpass 1.7 percent in 2024. The rate of inflation in the euro area could slow down from 8.4 per cent last year to 5.4 per cent on average this year, and next year’s 2.9 per cent rate is already close to the European Central Bank’s target. The outlook for the Hungarian economy in 2023 will be shaped primarily by the impact of record high inflation reducing household’s purchasing power and the adverse financing environment resulting from monetary tightening, which will constrain demand for both households and firms. Most of the year will be characterised by a contraction in consumption and investments. On the other hand, despite a turbulent and risk-laden international environment, the contraction in domestic demand is likely to be largely, if not fully, offset by a contribution from net export growth. Overall, GDP is currently expected to decline by around 0.5 percent, followed by modest growth next year.

Magyar Nemzeti Bank:

Inflation on a declining path


The Hungarian economy expanded dynamically last year. With the 4.6 percent annual GDP growth Hungary placed in the middle of the growth ranking of European countries. The time profile of growth was characterised by a duality: the dynamic growth in the first half of the year slowed down in the second half. Most sectors contributed to growth, while agriculture hampered GDP due to the extraordinary drought. As a reflection of last year, Hungary’s growth in 2023 will also be characterised by duality in terms of its time profile and structure. Economic growth will accelerate in the second half of the year and is expected to average between 0.0–1.5 percent for 2023 as a whole. Structurally, it is entirely based on net export growth, while inflation holding back consumption and the uncertain global economic environment restraining investments. Domestic inflation peaked in January 2023. In February, the year-on-year headline inflation was 25.4 percent, while core inflation was 25.2 percent. Inflation slowed down by 0.3 percentage points compared to the previous month, the price dynamics of processed food, alongside with fuel prices contributed the most to the disinflation. From the second quarter onwards, the CPI is expected to decline at an accelerating pace. Both external and internal factors point towards disinflation. Inflation will return to the central bank’s tolerance band in 2024. Labour demand has so far not reacted significantly to the economic slowdown and remains robust. Stable labour market developments are helping to re-launch economic activity. The current account balance reached its low in 2022, with the deficit rose to 8.1 percent of GDP. In line with the improvement in the external trade balance, including the energy balance, the current account balance is on an improving trend, the deficit will be halved in 2023.


Macronóm Institute:

Economic growth amid increasing risks


The Russian-Ukraine war’s outbreak has rewritten all previous economic expectations, and although last year’s economic growth was still favourable, the dynamic slowed down by the end of the year. The exploding inflation constrained consumption, while the tightening of the monetary policy pushed back investments, at the same time, employment appeared to be crisis resistant. The economic processes of the second half of the last year will stay with us at the beginning of the year, however, even with this, we expect growth throughout the year, the rate of which – with strong downside risks – may reach 0,8 percent, and then accelerate to 3,2 percent next year. The driving force of the growth this year will be net export, which will be supported by external demand, and the investment of the previous years turning into production. By the second half of this year, due to the slowdown of the inflation, through the growth of the real wages, the contribution of the consumption can become positive, and from 2024, investment can rise again. At the same time, there are significant risks surrounding our forecast: the external environment can dampen growth either through shocks in the energy markets, financial markets or supply chains, but the 8slippage of EU funds can also set back economic prospects.

Non-monetary management of inflation in the EU countries

Short-term fiscal and regulatory measures in the EU countries to the increase

in inflationary pressure in 2022.


A rapid rise in inflation has become a key economic policy challenge at the global level in 2022. The rise in consumer prices was driven by supply as well as demand factors. This paper reviews the anti-inflationary measures taken by non-central bank government institutions in ,European Union (EU) member countries to counter primarily the socio-economic effects of price shocks. Short-term measures are summarised in the analysis. The database consists of articles published in the online media between January 2022 and February 2023. The measures enacted are classified into sub-groups. According to them, their most common type was tax regulation, with Hungary introducing the most numerous and diversified measures of all EU countries.

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Külgazdaság Vol. 01-02/2023

Inflation or recession? Or is there any other option?

Inquiry of the editors of Külgazdaság about the main dilemmas of 2023

Having passed the years of deflation, followed by closures in 2020–2021 during the Covid–19 pandemic and the efforts of national governments and central banks to counterbalance them by fiscal and monetary manoeuvres, inflation has arisen in the European economies and even globally. Since the Russian forces attacked Ukraine in February 2022 the prices of food, natural gas, electricity, and some raw materials skyrocketed, adding an extra cost-push to the already existing inflation pressures. First, the US Fed started to loft the federal funds rate in March 2022 to cope with it, and the ECB followed suit only in September. Both in the EU and the US a new dilemma has arisen: would the interest rate hike cause recession, at least in a technical sense or should central banks be more cautious with tightening?

Külgazdaság asked several questions to its authors: what are the main reasons for the present inflation, including the role of the war and the EU sanctions? Increasing interest rates would be an adequate technique to curb it when external shocks play a major role. Is there any optimum solution to the inflation versus recession dilemma? If governments intervene in the local markets to diminish the households’ burden through price caps, subsidies, and social benefits, do they do more good or harm? Should they try to diversify the energy imports and/or make huge efforts to use the local resources for electricity and gas production etc?

We asked our authors to adjust this set of questions to Hungarian policies as well. We re­ceived the answers in the period ranging from January 4th and February 12th, 2023.

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Külgazdaság Vol. 10-11/2022

Economic policy options to address energy shocks in small-sized and open countries


Following the coronavirus outbreak and Russia’s aggression against Ukraine, double-digit inflation has resurfaced in Europe, mainly due to the rise in energy prices. Economic policy makers face information constraints because the persistence of the processes is unknown, while central bank intervention has no impact on the origin of the processes, although transmission is usually delayed. This paper examines the economic policy options for a small-sized and open country in the presence of a non-permanent energy price shock using a simplified semi-structural model based on New Keynesian principles. The paper assesses the short- and long-term per­formance of monetary and fiscal policy, complementing the relevant international literature. It concludes, in a scientifically novel way, that the qualification of a number of applied monetary policy rules suggests that passive monetary policy is preferable in the short run, while active policy is more beneficial in the long run. At the same time, the disadvantage of passive policy can be overcome in the long run by choosing the right interest rate rule. Even in the case of non-permanent shocks, fiscal policy can make a significant contribution to a return to the initial situation. The source of investment financing determines the economic path to a considerable extent. The paper shows that economic policy options are strongly influenced by the shock to foreign agents and the response to it.

Journal of Economic Literature (JEL) codes: E17, E47, E58, H30, H54.

The potential of macroeconomic crisis forecasting with text-mining specified random panel regression models


There are two classical views on economic crisis forecasting: one is that time series models are the most appropriate for projections of crises, and the other is that the strongest crisis signal is the change in the consumer price index and the various investor confidence indices. This paperpresents a Hungarian example of a random effects panel model (REPR) specified by text mining methods, arguing that the values of the error terms of the model allow for a much more accurate correlation using panel regression than using time series models, and that monitoring the foreign trade price index is more important than considering the consumer price index or the investor confidence index for crisis signals.

Journal of Economic Literature (EL) codes: C10, C80, E17.


Period poverty as an invisible deprivation. A summary of international and Hungarian experience


Contrary to stereotypes, menstruation poverty is not just a recurring monthly problem for homeless or severely disadvantaged women but also occurs in workplaces, schools and universities. The consequences of the Covid-19 pandemic have made this situation more difficult and brought invisible inadequacies surrounded by a multitude of taboos to the surface. Drawing on lessons from international examples, the most common steps are the provision of free feminine hygiene products in public institutions and schools and the reduction or complete abolition of the general sales tax or value-added tax, also known as the tampon tax on basic feminine hygiene products. Data from the European Commission’s Taxes in Europe Database show that Hungary has the highest tax on these products in the European Union, even ahead of Scandinavian countries. This topic is not widely researched in Hungary, but it is an area that needs to be explored even more urgently.

JEL: I31, J16, O10.

The praise of context – or on the state of economics in the context of Beáta Farkas’ book A Brief History of Economic Thought


(Akadémia Publishing House, 2022, 488 pages)

The theory of economic thoughts has gradually lost ground in the economics curriculum, and the economic actors seemed to assume in the period of intensive technological and mar­ket changes that the former ideational debates had lost their relevance. Yet, recent financial and non-economic crises, as well as renewed antipathy toward free trade and market competition within large segments of society have brought back long-debated academic issues such as the relationship between the market and the state, or challenges of global trade and financial openness. The monography of Prof. Beáta Farkas provides a comprehensive review of leading thinkers and the main schools of economic science and it also exposes the historical and social environment in which the great contributions to our stock of knowledge have been accomplished. The present economics mainstream has eventually absorbed a lot from previously peripheral tendencies such as the behavioural school, the institutionalists, spatial economics, and welfare economics. Yet it is hard to tell how much the present economics consensus influences what business leaders and po­licy makers think of the economy and economics and, as importantly, what leverage the modern economic thought may exert on the economy and its shapers.

Journal of Economic Literature (JEL) codes: A10, B00, D02, N10

The protection of foreign investments in Mongolia


This paper describes the evolution of Mongolia’s regulatory environment for the protection of foreign direct investment from the country’s democratic transition in the early 1990s to the present. The changes analysed in the study point towards a more level playing field for investors, as investment protection initially created significantly more favourable conditions for foreign investors compared to the situation of domestic investors. The continuous changes in the legal framework for investment protection have also affected the requirements for investment licensing, leading to the introduction of restrictions that have affected the activities of foreign state-owned enterprises in Mongolia. They also served to protect national mineral resources. The study will also cover the various instruments of investment protection, including the state’s commitment to the taxation environment. It also discusses international arbitration case law on foreign invest­ment in Mongolia.

Journal of Economic Literature (JEL) code: K33.

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Külgazdaság Vol. 03-04/2022

Economic analyses in Spring 2022

Külgazdaság has been publishing the analyses and the forecasts of Hungarian economic research institutions since 2001 and this tradition is continued in this issue as well. According to the Spring World Economic Outlook of the International Monetary Fund, “The war in Ukraine has triggered a costly humanitarian crisis that demands a peaceful resolution. At the same time, economic damage from the conflict will contribute to a significant slowdown in global growth in 2022 and add to inflation. Fuel and food prices have increased rapidly, hitting vulnerable populations in low-income countries hardest. Global growth is projected to slow from an estimated 6.1 percent in 2021 to 3.6 percent in 2022 and 2023. This is 0.8 and 0.2 percentage points lower for 2022 and 2023 than projected in January.” At the same time, the OECD estimates that in the global economy, GDP growth could be more than 1 percentage point lower this year than was projected before the war, whereas the rate of inflation, already elevated at the beginning of the year, could be higher than it would have been without the war by at least another 2.5 percentage points. The Hungarian National Bank and the research institutions were also compelled to modify their earlier forecasts and somehow estimate the impact of the war in Ukraine. Their brand new analyses arrived at the editorial office of Külgazdaság on April, 10th-12th.

The impact of the war against Ukraine on global value chains


This paper uses world trade indicators and international input-output tables to analyse the first-round economic effects of Russia’s war against Ukraine on value chains. Although the global world trade weight of the two countries is small, in some product groups or products (cereals, sunflower oil, metals, inert gases, etc.) it is dominant, and as a consequence, the reduction or complete loss of supply has caused or is causing disruptions in the food supply of some regions and in the production of certain industries, leading to a surge in world market prices and anticipating sustained high price levels. The main conclusion of the paper using the Eora global input-output database is that the major economic damage in the short term will be suffered by Ukraine, the CIS countries (Commonwealth of Independent States2 ), Russia and the Central and Eastern European EU member states. For Hungary, the risks are significant, especially through demand and supply shocks triggered by the embargo against Russia, but the exposure is moderate compared to the Baltic Republics and Slovakia. In this context, the report demonstrated the importance of diversification in the short term and technological development in the long term. The scientific novelty of the study is related to the innovative input-output approach used to quantify the direct economic exposures by investigating the impact of sales and production losses due to embargo and war. It has thus succeeded in capturing the bottleneck in the world economy caused by the shortrun loss of exports and imports (especially of energy commodities) that cannot be substituted, thereby raw materials needed for production turn out to be unavailable. Journal of Economic Literature (JEL) codes: C67, F40, F51.

Global Value Chains and Multinational Corporations – how do they relate? Summary of the international scientific conference of ELRN CERS Institute of World Economics (Budapest, 9-10th December 2021)


In addition to analysing the global production networks of multinational companies, the presentations at the two-day international conference discussed the impact of and responses to the disruptions in global supply chains caused by the coronavirus (Covid-19) pandemic. The results

presented confirm that participation in the global value chain protects companies to some extent from negative shocks. However, the ability of firms to manage supply chain disruptions is limited due to the lack of rapid diversification of supplier relationships. At the same time, there is a regionalisation trend in the geographical organisation of global value chains, as supported by several research findings. Reducing the length of the supply chain is also key to the sustainability of production. This is highlighted not only by the problems of the global organisation of the fashion industry, but also by the study of rare earth element mining. Several researches highlighted the difficulties of linking local companies to global value chains and the low and slowly growing domestic value added content. Indeed, local economies have more limited capabilities and resources to increase their share of higher value-added activities. Journal of Economic Literature (JEL) kódok: D22, F21, F23, L23


International Management András Blahó, Erzsébet Czakó, József Poór (Eds.) (2021). International Management (2nd extended edition, Akadémiai Kiadó, Budapest, 592 pages, in Hungarian)


The review of the handbook entitled International Management emphasizes the importance of a volume on the topic written in Hungarian and from a Hungarian perspective. The tripartite book presents in detail the macroeconomic environment affecting management performance, the specificities of corporate functions, and these two factors are illustrated by interesting corporate case studies. In addition to the book’s strengths (thorough and easy to learn, with some excellent chapters and case studies), the authors of this review also point out some weaknesses. They suggest, among other things, to pursue an approach from the perspective of company cases, to include a brief description of current debates in the international literature, to discuss problems with the availability of data, and the provision of data sources. Journal of Economic Literature (JEL) codes: M1, M2, M3, M5.

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Külgazdaság Vol. 01-02/2022

Which are the weakest links?

Katalin Antalóczy, István Benczes, Péter Ákos Bod, László Csaba, György Csáki, István Csillag, Dóra Győrffy, Péter Halmai, Diána Horváth, Gábor Karsai, Péter Mihályi, Dániel Molnár, L ászló Muraközy, Katalin Nagy, Éva Palócz, Mária Zita Petschnig, Gyula Pleschinger, Gábor Regős, Magdolna Sass, András Simonovits, Károly Attila Soós, Andrea Szalavetz, Péter Vakhal, Éva Várhegyi

Inquiry of the editors of Külgazdaság about challenges in the post-pandemic recovery Last autumn, international organizations, think tanks and research institutions were rather upbeat over the post-Covid recovery although they kept in mind various challenges such as the emergence of new virus variants, turmoil in global supply chains, soaring energy prices, accelerating inflation, etc. With the uprear of inflation, central banks in general and the European Central Bank and the US Fed in particular seem to be compelled to terminate their ultra-loose monetary policies and return to tapering as well as raise their reference rates. Governments, too, are under pressure to tighten fiscal policies to manage general government debts that mounted to almost unsustainable levels in some countries during the pandemic. The tandem of loosening monetary and tightening fiscal policies combined with a great number of uncertainties and risks in the global environment are likely to slow down recovery and trigger new contradictions, conflicts and challenges globally and locally alike. At the end of 2021, the editors of Külgazdaság asked several renowned Hungarian economists do share their views on these timely issues by focusing on the weakest links that may hamper global recovery as well as the rebound of the European or/and the Hungarian economy. The responses of 20 authors are presented in this number.

The New York Arbitration Convention – 60 years in the Hungarian practice


The Convention on the Recognition and Enforcement of Foreign Arbitral awards, done at New York on 10th June 1958 is one of the most successful international treaties, which has been dominantly influencing the development of international and domestic arbitration. The Convention celebrates the 60th anniversary of its entering into force in Hungary this year, and the Hungarian translation of the ICCA (International Council for Commercial Arbitration) Guide on the Convention, summarizing its international judicial practice for judges and arbitration practitioners has been published in the recent past. Based on the above, it is time to examine the domestic case law of the Convention, to identify the domains where our judicial practice is converging to the pro-arbitration bias of the Convention, as well as to shed light on areas where the domestic court practice is diverging from dominant and leading international trends.

Journal of Economic Literature (JEL) code: K410.

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Külgazdaság Vol. 11-12/2021

The relationship between digital development and export activity of Hungarian SMEs


Digital transformation has resulted in significant changes in the economy and society as well as in the life of companies. New technologies are accelerating globalization, but many small and medium-sized enterprises (SMEs) are lagging behind in internationalization. The objective of this article is to analyze the relationship between digital maturity (i. e. the application of digital systems) and export activity among SMEs. Domestic and international literary sources have typically discussed the internationalization of SMEs and the use of digital corporate technologies in SMEs separately. As a new approach, this paper amends the existing literature with the analysis of the interrelationship between the two areas. The authors tested their research hypotheses through a questionnaire-based survey comprising 316 SMEs. One of the most important conclusions of the report is that the use of most digital systems constitute the major driving force in internationalization: companies planning to accede to external markets are more likely to apply digital systems than those already present abroad and/or those not intending to enter foreign markets.

Journal of Economic Literature (JEL) codes: F20, L10, M15, M16, O19.

International experiences of government start-up financing


The state has an important role to play in financing start-ups at each stage of their development. The vast majority of start-up funding is provided by non-reimbursable state aid and soft loans, the latter backed by state guarantees. The role of venture capital is much smaller. However, it can be promoted by the state, notably through co-financing with private investors and by increasing the capital of private venture capital funds. An important tool to promote the recapitalisation of venture capital funds is the use of state guarantees by private investors in the funds. The most effective way for the state to participate in start-up financing is not by providing funds directly to firms, but by acting as a catalyst for financing by encouraging private market players. This analysis will show which internationally developed solutions for public support have been scaled up and how successful they have been.

Journal of Economic Literature (JEL) codes: L26, G20, G23, G24

Competition versus contention. The role of personal relations in late modern capitalisms


According to its definition in economics, competition is an exchange coordinated by impersonal market and bureaucratic institutions: in principle, the personal relationship between the two parties plays no role in its development. However, today’s literature describes a number of cases where the outcome of the exchange can be influenced by the personal nexus between buyer and seller, which may be ethical or aggressive towards each other. This suggests that in order to gain a better understanding of the functioning of late modern economies, it is necessary to go beyond an understanding of the market and bureaucracy to a conceptual exploration of the coordinating power of personal relationships. This paper will refer to such exchanges, which are also shaped by personal relationships, as contention (rivalry) rather than competition in the broad sense, and will attempt to describe them as accurately as possible using the tools of institutional economics. The analysis suggests that it is not only local cultural norms that can foster the emergence of capitalisms imbued with interpersonal relations, but also technological development and subsequent economic restructuring per se. It is also possible to see how competitive institutions can be destructured, giving

way to personal relations, and how, conversely, competitive norms can develop out of the web of personal relations.

Journal of Economic Literature (JEL) codes: P10; P51

A traditional industry in a new robe Ernő Molnár:

The industry of the semi-periphery and global production networks. The case of the leather industry (Didakt Kiadó, 2021, Debrecen, 302 pages, in Hungarian)


This book review highlights three particularly important features of Molnár’s book discussing the transformation of the Hungarian leather industry. 1. Despite significant upgrading, the principal actors of the industry are specialized in manufacturing activities, which can barely ensure their survival. 2. Semi-periphery is a key concept of the book, and the author elucidates why the only possible way out of this intermediate position for Hungarian actors is open to downwards. 3. Molnár’s analysis integrates two perspectives: the global value chain and the geographical perspective, discussing the transforming spatial structure of the industry. He provides illuminating case studies to explain how the industry diversified its traditional product mix dominated by light industry-specific consumption goods and explores the antecedents of the current spatial patterns of an industry that is gradually becoming mainly an automotive supplier.

Journal of Economic Literature (JEL) codes: L67, P31, R12.

Autonomous cars at the WTO’s repair station – Technological challenges of international trade law


The emergence and the spread of new technologies pose challenges, too, to the legal system, therefore not surprisingly, the legal scholarship has often addressed topics related to technology in recent years. Joining this discourse, this paper discusses from the perspective of the international trade law the challenges created by the proliferation of new technologies, including autonomous cars in this area of law. The main question of the analysis is whether the current normative system of international trade law is able to provide adequate answers to these challenges and to address the novel problems arising from the technological revolution. The first part of the paper reviews the interaction between international trade law and technology, demonstrates how the norms of international trade law affect technology itself, and conversely, how and what kind of regulatory challenges are posed by technology to international trade law. The second part examines the law of the World Trade Organization (WTO), the third one contains the summary and conclusions.

Journal of Economic Literature (JEL) codes: F13; O33

Review on Tamás Szabados: Economic Sanctions in EU Private International Law (Hart Publishing, 2020, Oxford, 280 pages)


Economic sanctions are key instruments through which a state or a community of states (e. g. the European Union) can use its economic power to pursue its political ambitions. Most of the time, these sanctions are analysed in terms of political science, international economics or international law, but Tamás Szabados’ monograph examines another, no less important aspect of them: their private international law assessment, i. e. the application of economic sanctions as legal norms by the respective judicial forum. In addition to defining economic sanctions, Tamás Szabados’ book also describes the different legal bases for their imposition, presents the practice of the Court of Justice of

the European Union and the courts of the EU Member States, drawing attention to the problems of the divided nature of this practice, and presenting possible solutions to them.

Journal of Economic Literature (JEL) codes: F13; F51.

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Külgazdaság Vol. 9-10/2021

The effects of inward foreign direct investments on Hungarian economic growth – heterogeneity by country of origin


After the regime change in 1989, Hungary has been involved in globalization whose one of the most important component are international capital flows. Within a rather short period of time, Hungary has become an attractive target for foreign direct investments (FDI). By now, the weight and role of foreign capital in the Hungarian economy is beyond question. The effects of FDI on the recipient country’s economy have been analysed for a long time in the relevant economic literature. The major conclusion is that FDI can foster economic growth. The main channel of the positive effects is technology transfer: FDI investors bring advanced technology and knowledge that can improve the recipient country’s economic performance. Accepting the existence of the transmission channel, it is assumed that the more developed the investor country, the stronger the effect is, since an investor of a developed country can bring more advanced technology and know-how. In this paper, this hypothesis was tested with the help of the so-called autoregressive distributive lag model on Hungarian macro-level data ranging from 2001 to 2018. The results confirm our hypothesis. Journal of Economic Literature (JEL) codes: F210, F430.

Hungarian export opportunities in the countries located along the routes of the New Silk Road


The New Silk Road has been China’s largest project ever, with the main goal of promoting economic development and networking in Asia, Europe and Africa. Today’s globalization, and the dramatic decline in specific transportation costs, as well as the development of railway technologies and the transformation of political structures, have once again put the construction of a “modern” Silk Road into the crosshairs of the Chinese state. Hungary has the potential to join the initiative through three railway lines. The report identified and proposed product groups and products for Hungarian exports to countries located along these railway lines. Thanks to the New Silk Road, and particularly to the development of rail transport, Hungary’s export structure could be transformed. The major conclusion of the paper is that domestic companies should focus mainly on agricultural, mechanical machinery, and pharmaceutical products, as they are perfectly suited to rail transportation in terms of both value/weight ratios and logistics. Journal of Economic Literature (JEL) codes: F13, F17, F21.

The digitization rate of Hungarian SMEs – could we then become ‘Digital Frontrunners’?


The study analyses the position of Hungarian SMEs in the European Union in terms of digital development, using McKinsey’s (2018a) conceptual framework of the digital development of EU * Brávácz Ibolya PhD, egyetemi adjunktus, Eötvös Loránd Tudományegyetem, Gazdaságtudományi Kar. E-mail: Bravacz.Ibolya@gtk.elte.hu Krebsz Rebeka, MSc Vállalkozásfejlesztés, projektmenedzser, Cognizant Technology Solutions Hungary Kft. E-mail: rebeka.krebsz@cognizant.com A kézirat első változata 2021. július 6-án érkezett szerkesztőségünkbe. https://doi.org/10.47630/KULG.2021.65.9-10.60 Külg. 9-10.indb 60 2021.11.08. 21:13:09 61 A magyar kis- és középvállalkozások digitális fejlettsége – Lehetünk-e… member states. The aim of the study is to test McKinsey’s (2018a) findings for Hungary based on data from secondary sources. The results show that the digital development level of Hungarian SMEs is still significantly below that of the most advanced EU member states and

the EU-28 average, and is only beginning to catch up with the latter. The paper refutes, refines and nuances the conclusions of McKinsey (2018a) for Hungary. Journal of Economic Literature (JEL) codes: O11, O33, F63.

The Anatomy of an Economic Catching-up The Korean puzzle – from hermit to cosmopolite (Akadémiai Kiadó, 2020, Budapest, 270 pages)


The article presents and analyses László Muraközy’s latest book. It covers two thousand years of economic history of the Korean peninsula, but focuses on the developments of the 20th century, with a special emphasis on the developmental state that emerged in the second half of the century. Following a brief introduction, the paper reviews the book chapter by chapter, not only providing a concise introduction to each chapter but also supplementing the chapters in several cases and pointing out shortcomings. Amongst these, it is worth mentioning that the democratisation processes of the 1980s and the consequences of the 1997/1998 financial crisis should have been discussed in greater detail in the book. Moving on to the present day, the role of SMEs and Foreign Direct Investment (FDI) in public industrial policy should also have been discussed, as they can be instruments of a developmental state adapted to globalisation. Journal of Economic Literature (JEL) codes: E6, F40, F52, F54, F63, G01, N00.

The development of the right to regulate and public exceptions in bilateral investment treaties


Bilateral Investment Treaties, or BITs, are extremely widespread worldwide and impose numerous obligations on contracting states. It has become a more and more frequent question in recent decades whether these treaties should contain provisions guaranteeing the states’ right to regulate, especially with regards to certain public interest measures, in light of the uncertain arbitral practice. And if there should be such a provision, its exact form and nature is still another question. The objective of this study was to examine the development of this right through certain highlightable BITs, dealing with both indirect and direct examples of the right to regulate. The result of the study is that it became possible for the author to create a developmental map of the concept, suggest a de lege ferenda recommendation on an ideal right to regulate and public exceptions provision, and draw conclusions with regards to the probable future. Journal of Economic Literature (JEL) code: K33.

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Külgazdaság Vol. 7-8/2021

Components of nominal convergence: real economic and price level convergence in the European Union between 1995 and 2019


Significant cross-country differences in real income levels are accompanied by sizable differences in price levels, and, in the longer run, convergence in real income levels goes together with convergence in price levels. Although the cross-country comparison of nominal per capita GDP levels at current exchange rates is neither suitable to measure real income differences, nor their changes over time, their decomposition into a real and price component can reveal the contribution of the two factors to nominal convergence. The decomposition may be performed by drawing on two statistical sources, providing conflicting indications with respect to relative price and real changes in the case of several member states of the European Union. However, both sources suggest that the

rapid nominal convergence of the Central and Eastern European member states between 1995 and 2008 mainly stemmed from the swift convergence in price levels (real exchange rate appreciation), while the deadlock in nominal convergence after 2009 is mainly due to the halt (reversal) in price convergence. Real economic convergence of the CEEU region continued in the 2010s, albeit at a slower pace. Journal of Economic Literature (JEL) codes: E01, F43, O47, O52.

Globalisation, regionalisation and geography: does distance still matter?


The leitmotif of this paper is ’rivalry’ between globalisation and regionalisation, which – at least at the level of academic discourse – intensified around the turn of the millennium. Globalisation seemed to be receding, regionalisation to be gaining ground through the 2010s, when nation-states ‘re-arrived’. In the meantime, and despite radical technological and ICT changes, international economic flows apparently continued to gravitate towards home regions, without being followed (with literally one or two exceptions) by economic and the underlying security policy cooperation and institutionalisation in home regions. It is within this framework, at the boundaries of the disciplines of international relations, international economics and geography, that this paper seeks answers, or rather, poses questions, with an aspiration to finding answers through further research. The presumed academic added value of the paper is that its analyses do not dissolve in the inevitable complexity of international flows and levels discussed but is able to define specific hypotheses and calls for future academic inquiry. Journal of Economic Literature (JEL) codes: F14, F15, F23, F50

Russia’s foreign trade: impacts of the WTO-accession and the sanctions imposed in 2014


Russia became member of the World Trade Organization in 2012, but in 2014, several partner countries imposed trade sanctions on Russia as a response to its aggression against Ukraine 92 Csontos Máté – Udvari Beáta triggering processes that could have significant impact on Russia’s trade. Academic research analysed the impact of Russia’s WTO membership and the sanctions on the economy separately. This paper established relationship between these two issues: namely, the research objective was to analyse whether trade sanctions introduced against Russia in 2014 influenced the unfolding effects induced by Russia’s accession to the WTO, and if yes, to what extent. A gravity model was applied that involved 30 partner countries covering 85 per cent of Russian foreign trade. The major conclusion of the paper is that joining the WTO affected Russia’s exports favourably, however, the trade sanctions did not weaken this trend.

The force majeure event as an exemption opportunity


An unforeseeable, unavoidable, objective external event, the so-called force majeure situation might exempt non-performing companies to pay compensation for violation of their contractual duties. The restrictive measures of Covid-19 epidemics such as air transportation prohibition, borders closure or extraordinary licensing have resulted in significant losses in operation of global supply chains. The article aims to examine the liability issues caused by the delayed or deleted deliveries referring to force majeure from the business professionals’ point of view. Based upon the lessons of the presented litigation and the results of the questionnaires addressed to Hungarian enterprises, the article aims to point to the complexity and difficulty of force majeure principle, contractual clause, and national regulation. Journal of Economic Literature (JEL) codes: K220, F190.

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