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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Külgazdaság Vol. 5-6/2021

The export-enhancing effect of a stronger relative protection of intellectual property rights


The objective of this paper is to introduce the notion of relative intellectual property rights protection strength and to analyze its effect on the international trade of goods. This new measure is interpreted as the strength of the intellectual property rights protection regime in one country relative to the strength of such a regime in a trading partner country. In the model presented in this paper, this factor affects the range of products that flow from an exporter country to its trading partner. The model predicts that if the relative intellectual property rights protection gets stronger in an importing country, then it attracts more imports of both high-tech and low-tech products into the country. The paper also analyses Hungary’s exports to empirically test the model’s predictions. Our final conclusion is that Hungary’s high-tech exports are affected positively and significantly by the strengthening of the trading partner country’s relative intellectual property rights protection, and that this effect is stronger than the otherwise also positive and significant impact on low-tech products. Journal of Economic Literature (JEL) codes: D21, D23, F14, K11.

Difficulties in diversification in resource-rich countries – the case of Botswana


Resource revenues are difficult to manage and they require specific expertise and wisdom from governments of resource-rich countries. This paper synthesizes two main strands of the existing literature by presenting the different transmission channels of the resource curse and by analysing the resource-based development strategy of Botswana. Most developing countries are resource-rich and undiversified – despite adequate and consistent government policies aimed at diversification. This paper points out that the failure of these diversification strategies is due to related endogenous and exogenous factors. Resource-rich developing nations need complex, country-specific solutions to catch up. Journal of Economic Literature (JEL) codes: L72, P28, F31, R58.

Digital transformation and Industry 4.0: experiences from Hungary, Serbia, Slovakia and Romania


Digitization affects all industries and transforms them significantly. The digital transformation has been accelerated by national and international measures taken in the context of the Covid-19 pandemic. Nevertheless, the effects of digital transformation and Industry 4.0 have yet been discussed in only a few empirical studies, making it one of the most important socio-economic research areas of our time. Not far from closing this research gap, but rather widening it further, the practice of 302 domestic companies and firms located in countries surrounding Hungary and involved in Industry 4.0 was explored with the help of questionnaire research. The results identified the focus areas and maturity of the examined digital and Industry 4.0 companies, as well as their spatial specificities. Furthermore, it was explored what companies active in Industry 4.0 expect from key actors in the digital and industry 4.0 ecosystem. The article also makes economic policy recommendations and identifies a number of further research areas. Journal of Economic Literature (JEL) codes: L22, L23, L25, M11, M15, M16, O14, O19, O32, O33.

Integration and digitalisation in the Central and Eastern European automotive industry


The role of the Central and Eastern European countries in the automotive industry of the EU is significant: they contribute to the competitiveness of the EU through their cost-based advantages and advanced technological environment. How have the location advantages of the region changed lately? How can digitalisation affect location and investment decisions in the automotive industry? This report analyses these changes in the trade cost theory framework, and through a firm sample. Its major conclusion is that the ever-wider application of digitalisation reduces trade costs and opens up new perspectives for firms, also in the Central and Eastern European automotive industry that has by now deeply integrated in the EU sector, while this may at the same time appear as a threat for peripheral locations. Journal of Economic Literature (JEL) codes: F15, F23, L62, O14.

Digitalisation and location advantages in Hungary


The slowdown of globalisation and the pandemic intensified the reorganisation of global production chains. In this process, multinational enterprises reconsider location advantages. Modern companies function in a digitalised environment, new business models are created with the increasing importance of factors such as innovation, digital infrastructure and international cooperation. Most indicators of digitalisation still display a laggard position for Hungary, particularly for domestic small- and medium-sized enterprises. The article analyses how the previous main Hungarian location advantage, the skilled labour force has vanished and how the stable legal and business environment has eroded. As political intentions to upgrade the education system in order to create the necessary competencies has been missing, Hungary will not be in the position of taking advantage of digitalisation: it is likely to lag behind in international competition. Journal of Economic Literature (JEL) codes: I20, J24, L23

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Külgazdaság Vol. 3-4/2021

Economic analyses in Spring 2021

Külgazdaság has been publishing the analyses and the forecasts of the economic research institutions since 2001 and we follow the tradition in this issue. As to the Spring World Economic Outlook of the International Monetary Fund, “global prospects remain highly uncertain one year into the pandemic. New virus mutations and the accumulating human toll raise concerns, even as growing vaccine coverage lifts sentiment. (…) Global growth is projected at 6 percent in 2021, moderating to 4.4 percent in 2022.” But the European outlook is more modest and even Hungary will lag behind the 2019 results – this is the consensus domestic research institutions have concluded. It is only Magyar Nemzeti Bank (the National Bank of Hungary) that gives a chance to offset all the losses of the economy had suffered in 2020. Financial Research Plc. published its forecast on March 24. The National Bank of Hungary introduced its Inflation Report on March 25. GKI Economic Research Co. released its outlook on March 30. Századvég Economic Research sent its analysis to Külgazdaság on March 31. KopintTárki Institute of Economic Research Co. closed the series of presentations on April 7. Journal of Economic Literature (JEL) codes: A1, E0, E6.

A new mega-regional trade agreement: Regional Comprehensive Economic Partnership


The objective of this paper is to provide a comparative evaluation of the recently signed mega-regional trade agreement, the Regional Comprehensive Economic Partnership (RCEP). From among the broadly defined antecedents, the report gives an overview on the circumstances of the

emergence of the Transatlantic Trade and Investment Partnership (TTIP), the TransPacific Partnership (TPP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). These initiatives are closely associated with the fact that since its foundation in 1995, the World Trade Organisation (WTO) has been unable to strike any important multilateral agreement. The failure to nominate new members to the Appellate Body has, by now, paralysed the WTO. However, the signing of the RCEP, together with CPTPP, represents the rise of Asia and the Pacific region and, at the same time, the diminishing influence of the United States in the region. Journal of Economic Literature (JEL) codes: F10, F13, F15.

Key issues for deepening the European Union Description and reflections on the book Péter Halmai: Deep integration. Economics of Economic and Monetary Union (Akadémiai Kiadó, 2020, Budapest, 538 pages, in Hungarian)


In his book, Péter Halmai discusses the theoretical, economic strategic and economic policy aspects of European integration. It provides a new, comprehensive analysis of the economics of the economic and monetary union. He points out that European integration is a deep and broad form of regional economic cooperation. It explores and demonstrates that depth is crucial to the European integration. A novelty is the analysis of the main features of deepening, the complex presentation of the economic mechanisms, determining factors and the institutional system facilitating deep integration Journal of Economic Literature (JEL) codes: F15, F36

Plurilateral international treaties in the system of the World Trade Organization DALMA TAKÓ The Doha Round made it clear that the multilateral treaty system of the World Trade Organization is not operable. The consequences caused by this fact – a long-continued crisis and serious tensions – need to be solved. Among the possible solutions, plurilateral treaties get more and more attention in international trade law. However, there are several different opinions on these agreements. Due to the increasing actuality of this issue, this paper deals with the definition, status, role and significance of plurilateral treaties within the treaty system of the WTO. These aspects are examined not only on the basis of the Marrakesh Agreement, but also from the perspective of sources available in public international law and international trade law. The purpose of the paper is to expose the current problems in connection with plurilateral treaties and also, to possibly answer emerging issues. Journal of Economic Literature (JEL) code: K33

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Külgazdaság Vol. 1-2/2021

Digital transformation and new actors in manufacturing value chains


The point of departure of this paper is the old new phenomenon of industry convergence, being intensified by digital transformation. Zooming in on manufacturing value chains it highlights that one manifestation of industry convergence is the multiplication of participants, originating in non-manufacturing sectors. The paper explores the specific features of digital technologies and firms’ digital transformation strategies that enhance the number and increase the importance of cross-sectoral transactions and drive industry convergence. Journal of Economic Literature (JEL) codes: L23, L60, O33

Dispute with the EU critique of an extreme leftist


Perry Anderson in three major studies maintains that the European Union is an antidemocratic, neoliberal construction that attacks national sovereignty and exploit the poor member countries and support the dominance of a narrow oligarchy. He concludes that the European Union has to be destroyed. This article discusses Anderson’s main arguments, questions the real existence of national sovereignty, especially in case of smaller countries, and proves either the mistakes or the superficiality of the critiques. Journal of Economic Literature (JEL) codes: F15, F60

Can post-crisis financial regulation become more robust in the years of national implementations?


Constant and recurring elements of the discourses related to financial regulatory reforms in recent years are the concerns about the complexity of regulation, that could lead to regulatory fatigue. Elementary changes in the financial sector depend however on the success of national implementations. The examination of the issue of complexity in financial regulation is therefore topical and necessary. The paper takes a look at the theoretical approaches along which the harmfulness or necessity of complexity can be judged also in different regulatory constellations. Furthermore it presents the concept of a robust financial regulation that can contribute to minimize

unexpected complexity through fine-tuning financial regulation and could also be an appropriate response to the fundamental complexity that characterises the system. Journal of Economic Literature (JEL) codes: G01, G20, G21, G28, G31, G32, G33, H12

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Külgazdaság Vol. 9-10/2020

EMU 2.0 – Responsibility versus solidarity?


Deepening of the Economic Monetary Union is the key issue for the European integration. During the debates on EMU 2.0, two approaches have emerged. These take different positions in terms of the interaction of solidarity and responsibility, and of risk sharing and risk reduction. In fact, Solidarity and Responsibility of the Member States are two sides of the same coin. The new synthesis of these two points of view allows substantive progression. At the heart of the EMU reform there can be deeper economic and financial union, resilient structures, the increase of risk sharing and the reduction of inherited risk. Successful integration can be achieved by inclusive, highly explained, understood and adopted reforms. All this is not only possible through “large packages” of the EMU 2.0 reform. At the same time, it is necessary to clarify the critical mass of these measures (“small package”). Journal of Economic Literature (JEL) codes: F02, F15, F17, F43, F55.

Scramble(s) for Africa – Some issues of global economic integration and marginalisation


The paper compares the recent scramble for Africa in general and Sub-Saharan Africa in particular with the previous ones led by the great powers. The comparative approach focuses on the identification of similarities and differences with the aim of providing a nuanced view on the scrambles for the resources of the continent. Its major conclusion is that the increasing influence of great powers over time has nothing particularly new in it and behind similar interests can be identified. Sub-Saharan Africa is still dependent on external markets, and the economic powerhouses of the world still regard it both as a resource base and a market for their own products. Despite the scrambles that took place in different time periods, the involvement of the great powers could not reverse the marginalisation of Sub-Saharan Africa in the global economy. The core countries of the world economy may transform the trade pattern of the region to a certain extent, but the room of manoeuvre still remains quite limited for the less powerful open economies of the continent. Journal of Economic Literature (JEL) codes: F54; N17; O10.

Risks of the Hungarian economic structure


Foreign trade relations play a decisive role in Hungary’s economy, as a result of which trends taking place in the world economy may have a significant impact on its economic performance. Consequently, the position of industries in global value chains and the structure of input-output relations are relevant factors in terms of Hungary’s economy. The objective of this study is to analyze the dependence of domestic sectors on inputs and outputs on the basis of which the risks inherent in foreign trade relations for the stable operation of the economy can be identified. According to the results, besides the automotive industry other domestic sectors such as the manufacture of computers, electronic and optical goods and the manufacture of machinery and equipment n. e. c. also have strong cross-border exposure to global value chains. The majority of these industries have strong ties to the German economy, however, some of them also significantly depend on other countries, such as China, Italy, Austria or Denmark. Journal of Economic Literature (JEL) codes: C67, O25.

The Crisis Calls for Rethinking Economic Policy

Some thoughts inspired by Stephanie Kelton’s book The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy Public Affairs, 2020, New York


The global scale of the COVID-19 pandemic renders traditional tools of macroeconomics illsuited for handling the crisis. A growing consensus unfolded that it is time to rethink economic policy. There is a need for prompt and large fiscal and monetary intervention. The heterodoxeconomics represented by modern monetary theory (MMT) offers a novel approach to assess and meet these needs. MMT calls for countries that can print their own currency to ignore debt-to- GDP ratios, rely on the central bank to backstop public debt, and continue to run deficit spending unless and until unemployment and inflation return to normal. Proper use of this approach requires a clear understanding of the functioning of the monetary and banking system. Godleytype stock-flow consistent macroeconomic accounting helps to navigate with these and other real economic and ecological constraints. Stephanie Kelton’s book The Deficit Myth does a good job by discussing these important topics from a new perspective, in a manner that was simultaneously shocking and yet compelling. Journal of Economic Literature (JEL) codes: E12, E52, E62.

Is the progressive turnover tax to be sanctioned?


The article provides an explanation for the case law on the EU Member States’ progressive taxation, levied on turnover in the light of the harmonised EU law. The introduction of special sectoral taxes has become an important measure of local tax policies, which in part generate significant budget revenues but, more importantly, they are also designed to protect the position of weaker domestic competitors. This policy raises the suspicion of illegal state aid, but now this debate seems to be settled after a number of judgements decided by the Court of Justice of the EU in favour of the Member States. These judgments came as a general surprise to experts in the Member States concerned because the covert, yet effective state aid provided to domestic competitors seems obvious for those who live here. However, the EU’s existing ‘legal toolbox’ has proved to be insufficient to stop the Member States from following a policy of illegal state aid. The law requires clarity, and the practices that can be observed in the case of the apparently selective sectoral taxes can be hardly disguised. In this sense, even the judicial bodies of the EU, living to some extent in an ivory tower, cannot be blamed either. Journal of Economic Literature (JEL) codes: F02, H27, K34.

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Külgazdaság Vol. 7-8/2020

Innovative companies – innovative investors

Western experiences of equity market for startups


In addition to traditional venture capital funds, business angels, business accelerators and incubators, as well as crowdfunding platforms play an important role in financing startup companies. As these market players are relatively new, little experience has been gained with their operation. It is not yet known whether the market reorganization between players in this capital market will prove to be lasting, especially in view of the unfolding global recession in connection with the spread of the COVID-19 pandemic. However, learning from experience can be beneficial to less developed regions for the creation and successful expansion of startups using alternative sources of capital and associated technical support, networking, market knowledge and men­toring. The article provides an overview of the functioning and development trends of the new institutions providing equity financing, including their cooperation and competition, as well as their impact on the sponsored businesses. The trend so far indicates a decline in the importance of traditional venture capital funds in financing startups and early-stage companies, as these funds increasingly turn to larger-scale investments by more mature companies. This process has been accompanied by a stronger emphasis on the participation of large corporations in markets in many forms, the increasing role of institutionalized business angels, business accelerators and incubators, and the development of crowdfunding platforms providing capital through community funding. An important lesson is that successful former startup founders, utilizing their experience and wealth, play a key role in the preparation and execution of capital investments in startups in all types of alternative capital organizations. Thus, the successful development and capital supply of startups are becoming the result of a self-reinforcing process.

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

Keywords: Entrepreneurship, Startup, Equity finance, Venture capital, Business Angel, Accelerator, Crowdfunding.

The European Union and China: conditions of the balanced trade relationship


China is one of the dominant trade partners of the European Union, however, the risks and geopolitical concerns of economic relations have come recently to the fore in the EU’s trade strategy. In this study, multivariable linear regression is applied based on the data of OECD countries to reveal the factors which can help to avoid the import exposure from China. The analysis of the period between 1992 and 2018 confirms the impact of factors which are considered decisive for import exposure in the relevant literature. The number of free trade agreements and the growth rate of medium and high-tech products compared to the total industry show the highest explaining power. The lesson of this analysis is that on the one hand, the EU should insist on rule-based free trade relationships despite the current worldwide protectionist trend. On the other hand, a successfully implemented industrial strategy has crucial importance for the balanced trade relations with China.

Journal of Economic Literature (JEL) codes: F13, F14, O24.

Keywords: European Union, China, trade, import exposure.

The Brazilian Variety of Capitalism


The article analyses the major institutional spheres of the Brazilian market economy and the interrelationships between their elements based on the approach of the Varieties of Capitalism (VoC) school. For a better understanding of the path dependent nature of the Brazilian economy, the firm-centred perspective of the VoC is embedded in the analysis of the political system, and changes in the economic role of the state are also considered.

The case study analysis of the Brazilian market economy and its operational logic within this extended theoretical framework offers a novel approach in the domestic and international literature and results on the formulation of novel theoretical and practical insights regarding Brazil’s development path and in more general terms late comer emerging economies and the middle income trap.

The election of the radical far-right president, Jair Bolsonaro by the end of 2018 can be explained by one basic message: the promise of change. In contrast to this, according to the main argument of the paper the basic mechanisms of the Brazilian market economy are dominated by state guidance, hierarchical structures and informal relations that are long-standing and stable features. The objective of the study is to prove that these unique operational logics and principles have been sustained even during the decade of the social developmental state in the 2000s and have not been substantially changed during the years of the (neo-)liberal economic policy turn starting in 2012. The elitist, hierarchical and informal relational organization of the Brazilian market economy is expected to be further strenghtened in the light of recent political and economic changes.

Journal of Economic Literature (JEL) codes: O10, O54, P16.

Keywords: Brazil, Varieties of Capitalism, system paradigm, developmental state, middle income trap, path dependency.

Legal challenges of the retention of worker status as reflected in recent case-law of the Court of Justice of the European Union


In recent years, a growing number of cases related to the retention of worker status have em­erged in CJEU jurisprudence with reference towelfare benefits, requiring a much deeper analysis of the field treated earlier as peripheral. Such an analysis seems especially justified in the light of the current political and legal discourse concerning the issue of free movement, focusing on the question of equal treatment in the field of welfare assistance for mobile citizens. The purpose of this study is to present and put into context the relevant case-law of recent years by analysing the judgments of the CJEU in two cases that are benchmarks in this field: the Tarola and Saint Prix cases. Both cases highlight the key role that economically active status continues to play in integration law. These judgments also shed light on the challenges arising from the difficulties in distinguishing between the economically active and inactive EU citizen statuses. This issue emerged as an increasingly grave problem in the field of law of free movement, posing a serious dilemma for law enforcement.

Journal of Economic Literature (JEL) code: K31 Labor Law. Keywords: retention of worker status, equal treatment, welfare benefits, free movement of wor­kers.

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