Külgazdaság 1-2/2024

Inquiry of the editors of Külgazdaság:
Should we rethink economic policy after the Great Pandemic and the Great Inflation?
Recession or inflation? Or is there another choice? – this was the question asked a year ago by the editors of Külgazdaság. The question is still relevant today. In the days when we had sent out our survey question to our authors, the major central banks (US Federal Reserve, the Euro¬pean Central Bank, the Bank of England, and the People’s Bank of China) were trying to restore price stability by positive real reference rates exceeding the inflation rate. Global organisations and most countries are settling into a period of persistently high interest rates, whereas barely a decade ago, researchers still wondered how economies could function in a deflationary, negative interest rate environment.
After the dramatic turnarounds of the past decade, we approached our authors with a question inspired by the subtitle of a volume of essays edited by Olivier Blanchard and Lawrence H. Summers (Evolution or Revolution? Rethinking Macroeconomic Policy after the Great Recession): Should we rethink economic policy after the Great Pandemic and the Great Inflation?
This ironic question applies to economic policy pursued in Hungary as well. Whereas the National Bank of Hungary insists on maintaining a positive real interest reference rate, the government would expect sharp cuts and revert to the high-pressure economy model applied before 2022. However, the risks to economic growth are also specific for Hungary, such as the stall of the inflow of EU funds, the desire to accelerate the inflow of foreign direct investments and the import of labour force, and the reduction of energy dependence, which is not in line with the additional energy need of huge ongoing and planned investment projects. Risks also include the level of government indebtedness, which is well above the peer average, the opening of the income gap, and the slow but steady decline of budgetary expenditures for human services.
Our authors have been invited to discuss one of the segments of the exposed dilemmas at the global or national level, to analyse them thoroughly or to add new perspectives. Responses were submitted to the editorial office of Külgazdaság between 17 December 2023 and 16 February 2024.
Is electric vehicle battery production a bad idea? (An old debate in a new guise)
PÉTER MIHÁLYI
Throughout 2023, there has been a growing public response to the investments in Hungary – nearly 40 in number – that are already producing or will produce batteries in the foreseeable future or are serving industrial development related to their production. Highly respected academics have much discussed the subject. Most of the opinions published in the media are critical. On the one hand, they point to the risks of an immature technology that affects all countries. On the other hand, they consider that a further increasing commitment to the automotive sector would be a mistake in economic policy for Hungary. This short paper highlights four of these risks. It examines particularly the criticisms based on a quantitative analysis of value chains.
Journal of Economic Literature (JEL) codes: O14, O25, O32.