Through a Glass Darkly The Content of Statistical Data on Foreign Direct Investment

 KATALIN ANTALÓCZY – MAGDOLNA SASS

 With the advancement of globalization, the role of foreign direct investment has grown rapidly both in the global economy and in individual national economies. As such, their analysis is unavoidable when examining practically any economic phenomenon. The main data source used for this purpose is that on foreign direct investment found in the balance of payments. However, the purpose of a balance of payments is to record how and in what form a country executes various financial transactions with the rest of the world. Thus, such data on direct investment does not necessarily correspond fully to the direct investment content of economic analysis. During the crisis, the increase in the use of transactions aimed at loss reduction and tax optimization by multinational companies has resulted in an even greater gap between the data and the phenomenon being analysed. Therefore the authors would like to emphasize that one needs to be very circumspect when analysing such data.*

Journal of Economic Literature (JEL) code: F21, C80.

Squaring the Circle? Government as Venture Capital Investor

 JUDIT KARSAI

 The government participates in the venture capital market in many different ways. This paper examines the role of the state as an investor and gives a thorough review of international trends through examples. It outlines, that contrary to direct participation that could result in the distortion of market processes, the government is increasingly contributing to the growth of venture capital market funds while including the private sector in the process. The inclusion of the private sector is important primarily because this solution ensures the selection of projects that are economically viable, promising and free from political influence, the selection of financing periods independent from election times, and the adequate expertise and  incentives of  managers  entrusted  with  the  investment’s management.  The main conclusion of the study is that only privately managed venture capital funds financed only to a lesser extent by the state allow for the adequate utilization of state resources, and thus they contribute to the achievement of economic policy objectives and improve the capital supply of young, promising companies.*

Journal of Economic Literature (JEL) code: G23, G24, G28, M13, O31.

Macroprudential Paradigm Shift in Hungarian Bank Regulation

 KATALIN MÉRŐ – DÓRA PIROSKA

 Within the framework of the global macroprudential paradigm shift, which directs regulators’ attention on systemic risks, governments that had to intervene during the financial crisis to maintain financial stability now require banks to comply with more and stricter rules. The new paradigm significantly increases the powers of state institutions over the banking industry. This article analyses the distinctive aspects of the international paradigm shift in bank regulation as observed in Hungary in light of the changes in bank regulation and the institutional framework of bank supervision between 2008 and 2013. Its main findings are as follows: (1) the 2008 agreement between the Hungarian government and the IMF played an important role in the paradigm shift, (2) regulations enacted within the framework of the new paradigm strengthened Hungarian state institutions vis-à-vis the banking sector, (3) the opposition of the banks to the changes in Hungary is attributable to the inherent quality of the new paradigm: it raises the cost of banking. The analysis does not provide a conclusive answer to the theoretical question of whether the banking sector gains in stability with the implementation of the macroprudential paradigm.*

Journal of Economic Literature (JEL) code: G 280, G 010, F 590.

Competitiveness and Internationalisation in the Hungarian Small Business Sector in the 2010s

 LÁSZLÓ SZERB – GÁBOR MÁRKUS – VIVIEN CSAPI

 Many see the resurrection of the Hungarian economy, torn by the world economic crisis, in the acceleration of exports and, more generally, in the increasing internationalisation of domestic businesses. The government’s new foreign economic policy strategy, still only released in draft form, expresses ambitious goals; among others a six-fold expansion of businesses capable of export. This article uses data from a survey concluded in 2013 assessing 799 small businesses to analyse the tendencies towards internationalisation of Hungarian small businesses in the context of competitiveness. According to our observations, the ten pillars of competitiveness are closely connected to one another; the consonance of pillars is more important than achieving outstanding results in the case of any single one. Therefore we examine internationalisation not merely on its own but in conjunction with the nine other pillars constituting competitiveness. We evaluate the internationalisation and export potential of Hungarian small businesses through the comparative analysis of eight groups we created using cluster analysis. As expected, the most internationally active businesses also proved to be the most competitive. However, we found numerous businesses with low levels of competitiveness that – in contrast to the convictions of any internationalisation theory – were engaging in tangible export activities. Despite the presence today of several thousand exporting and export- capable small businesses in the Hungarian economy, we do not believe it likely that this number could grow drastically in a short period of time.*

Journal of Economic Literature (JEL) code: F 23, L 25.

Legal supplement

Decline of the Principle of Equal Treatment in the Global Economy

 JÁNOS MARTONYI

 The framework of international trade that regulates towards multilateral agreements and universality, as created by the GATT and the WTO, was based upon the principle of equal treatment. The technique for the legal implementation of this principle is the most favored nation treatment (invented a long time ago), was not only made multilateral, but also elevated – albeit with some exceptions – to be a general rule of GATT. Over the decades the regulation has been continually expanding and gaining depth and has become increasingly free as a part of the globalization process. However, about fifteen years ago this development came to a standstill becoming a victim of its own success. Besides numerous economic and political factors one reason for this slowing down was that the principle of equal treatment and the technique for its legal implementation became increasingly subordinate. Since one of the main pillars of the system was weakened, the whole system was put at risk. At first the most favored nation treatment became an exception instead of a fundamental principle. Then the exception was applied in an ever-widening scope, which created a new system based upon a wide network of bilateral and regional free trade and preferential agreements. This caused the deterioration of the originally intended universalism and the very fragmentation of the global regulatory framework. The achievements of the multilateral regulation of world trade must be preserved, while recognizing the fact that the global system is far less uniform and homogenous than is frequently believed and that the economic, political, cultural and civilizational differences demonstrate even in the field of legal rules and regulations that the world is not as flat as it may appear.*

Journal of Economic Literature (JEL) code: F13 – Trade Policy; International Trade Organizations.

Inquiry on the changing structure of the Hungarian economy and of the financial system

The changes of the world economy in the aftermath of the 2008 crisis and the Hungarian economic policy’s newly framed priorities after 2010 – concerning the desired structure of the Hungarian economy – put questions concerning the structural transformation of the Hungarian economy and new needs related to financial intermediation in the limelight.

Our inquiry in 2015 seeks answer to the following issues:

How far do structural changes either occurring spontaneously or as a result of the changing state regulation comply with international trends and within those with processes taking place in countries in similar conditions? Put differently: how much are the reorientations of the Hungarian economic policy are in accordance with the structural changes observable in the world economy and what risks can the unfolding of these reorientations entail?

After the crisis there appeared a worldwide need for a more secure and more stable financial intermediation and a more stringent supervision. How far do the top-down changes in Hungary directed by the state satisfy these criteria?

Our question is also related to issues concerning the structure of the Hungarian economy such as the observable trends in the sectoral, employment, consumption, import and export structures and the targeted reduction of the weight of services in the economy. As far as financial intermediation is concerned, we are curious how much the state interference with market and property relations, the merging of the central bank with financial supervision, and the development of new reorganization regulation support financial stability and economic growth. Lastly, to what extent can the changes in the structure of the Hungarian economy and of the Hungarian financial system contribute to the mitigation of the problems of employment, growth, competitiveness and financial balances?

The Role of Expectations in the Success of Bailout Programs: Crisis Management in Greece and Ireland

DÓRA GYŐRFFY

 In the context of the debate on the effects of fiscal austerity on growth the paper aims to explain the role of expectations in the emergence of austerity cycles during financial bailouts. It argues from a political economy perspective that the conditions, their implementation and market reception are forms of a social dilemma. In such situations expectations about the actions of other actors approximated by the concepts of trust or distrust play a critical role. An environment of trust among major actors is conducive to mitigating the size and effects of fiscal contraction, while an environment of distrust is likely to magnify both. It is also argued that the credibility of government is the key driving force in these self-reinforcing cycles. The crisis management experiences of Greece and Ireland serve to illustrate the theoretical model.

European integration and economic growth Factor market integration, growth effects and European growth model

PÉTER HALMAI

As regards the medium term growth effects, the induced physical capital formation should be stressed. European integration improves the efficiency of production factor combinations used in the production of the output. Due to the increased efficiency Europe becomes more attractive for investors, investments increase. As a result of this process, the initial efficiency surplus of the integration is strengthened by the induced physical capital formation too. The medium term growth effect lasts until capital formation is above the average. As the capital per worker ratio increases in the neoclassical growth theory, the benefit from an additional capital investment decreases. Above the average capital formation continues until the marginal product of an additional unit of capital equals the its marginal cost. This effects prevails therefore only in the medium term as it gradually cease to exist. (This kind of investment boom characterized Spain at the time of its EU accession.) Long term growth effects result in a permanent change of the accumulation ratio. As the accumulation of the physical capital follows the law of diminishing returns, long term growth effects can mainly attributed to knowledge accumulation, e.g.: to technological development. In case of medium term growth effects the per capita output stabilizes at a new, higher level. In case of long term effects however, there is a permanent change in the rate of growth. The latest growth theories suggest that the integration insures a permanently higher rate of growth relative to the case without integration.

 Budget support: towards a more effective aid (?)

BEÁTA UDVARI – JULIANNA PONTET

Recently, there have been changes in international development cooperation, beyond the growing role of emerging donors new types of aid – for example, budget support – occur besides traditional project aid. Several donors and the relevant literature expect that budget support may increase aid effectiveness. The European Union is among the donors which appreciate budget support, its role appears in guidelines and statements. Despite these facts, the Hungarian literature does not deal with the potential effects of budget support. Present article aims to give an overall picture of budget support, introduce its advantages and disadvantages, and present the main tendencies from the point of view of recipients. We intend to use a general approach, so our aim is not to analyse an independent donor’s or recipients’ activity.

Legal supplement

Concept of reasonable accommodation and its economic nexus

ORSOLYA MIKOLA

Reasonable accommodation or reasonable adjustment, as main tool combatting discrimination based on disability is a changing concept, similarly to the definition of disability. In the frame of the European Union, reasonable accommodation is ex- pressed in the context of labor law, and also in the field of employment and occupa- tion. The Court of Justice of the European Union has fulfilled its task to interpret it, like in the case of Coleman, Chacon Navas, Z., HK Danmark and Kaltoft. With giving a broader meaning of disability and more concrete solutions of reasonable ac- commodation, I have the vision of an automatic system, where employers are aware of their social responsibility to eliminate all barriers, both physical and attitudinal ones, where the group of people with disabilities will be more respected and more valued.

 EU vs. WTO

Irreconcilable conflicts or winds of change?

BIANKA ESZTER BOHÁTI

 The main purpose of the present article is to make a description about what kind of practices of refusal have been introduced by the European Union in connec- tion with the rights of WTO. In most cases, the procedures of the EU’s are depicted through related legal cases. The main goal of examining these cases is to present and unfold the underlying problems of refusing legal practices which over the course of time became insensitive to change. This „approach” has been the reason of in- tensive debates over decades, which began with the foundation of GATT, and has resulted in a long chain of reactions whose influence can be still sensed up until today. It is essential to highlight that trivial fact that, not surprisingly, in the field of world trade, the main leading role is casted to those states which obtain a more significant economic potential. Since this article has been written in the ’old continent’, the conclusions drawn from legal cases and the resulting problems concerned are discussed in relation to the European Union accordingly. As a conclusion, it is stated that the viewpoint of the approach mentioned above makes impossible the vindication of individual rights. This disadvantage is caused by countermoves initi- ated against individuals and due to refusing practices of the EU. A solution to these problems proposed could be that if the EU, besides placing its interest forward, took into consideration the interests of individuals and, in the light of these, reconsidered its attitude towards the rights of WTO.

Foreign direct investments of domestic firms: emerging Hungarian multinational companies

KATALIN ANTALÓCZY – ANDREA ÉLTETŐ – MAGDOLNA SASS

 Hungary is among the leading outward investors of the new member countries of the European Union. This article, which presents the first results of a research project, tries to show what those factors are which enabled Hungarian companies to expand abroad successfully. Our methodology is based on company case studies of large and smaller-sized investor firms. According to our results, the special ownership advantages of privatsed companies are rooted int he pre-transition period int he first phase of their international expansion, in later phases however, the management changed these succesfully. The ownership advantages of those companies, which were established after 1990 are more similar to those of „traditional” multinational companies. Furthermore, we made a link between the special ownership advantages and virtual indirect investors, through showing that the strong position, knowledge and experience of the management is shaping and modifying constantly these specific ownership advantages.

Critical Success Factors of Export Excellence and its Policy Implications. The Case of Hungarian Small and Medium Sized Enterprises

ERZSÉBET CZAKÓ – ERZSÉBET KÖNCZÖL

The slow economic growth rates in the European Union raise the question how the internationalization of small and medium sized enterprises (SMEs) as a possible engine of economic growth, can be facilitated by national economic policies. Research evidences in International Business suggest that the enterprise competencies are critical in internationalization. It is a proposition, that economic policies should facilitate the development of adequate competencies with SMEs. 10 case studies on exporting Hungarian majority owned SMEs were analyzed to explore their critical success factors (CSFs). The paper contrasts the enterprise levelfindings with economic policies towards internationalization by the findings of a qualitative research.

Competitiveness and internationalization in the Hungarian small business sector in the 2010s

LÁSZLÓ SZERB – GÁBOR MÁRKUS – VIVIEN CSAPI

 There are many experts and politicians consider internationalization and increased export the way to improve the Hungarian economic growth perspectives. As a part of the new foreign economic policy strategy, the government reelected has come up with very ambitious goals as the six-fold increase of the number of exportable businesses. This study, based on a survey containing 799 small businesses, analyses  the  internationalization tendencies of  the  Hungarian  small  businesses from the competitiveness perspective. According to our view, the harmonization of the ten competitiveness pillars is more important than having an extremely good performance in one or two pillars. As a consequence, we can examine internationalization in relation with the other nine pillars of competitiveness. We evaluate the internationalization of the Hungarian small businesses by comparing eight clusters. According to our initial expectations, the most internationalized business group firms are also the most competitive ones. However, we have found several businesses with low competitiveness points that were active in export. This finding contradicts to any internationalization theories. Despite, that there are many small businesses in the Hungarian economy that are able to engage in export and internationalization the drastic increase of the number of exporting small businesses is not likely at least not in a short run.

 Key factors of Hungarian companies’ internationalisation

ANDREA S. GUBIK

International activities are closely linked to strong corporate performance, growth orientation and innovation activities. Even if it is not clear whether these factors are the conditions or the results of internationalisation, it is essential to encourage companies to enter foreign markets. Since foreign market entry modes are of various complexities, they require different readiness from enterprises but also promise different level of success. The present paper analyses the companies’ choice about the mode and time of foreign entry. To highlight this decision, beyond the objective firm characteristics (company size, field of activity, ownership structure), the effects of corporate resources for internationalisation, attitudes of owner/ entrepreneur/manager to internationalisation and the characteristics of the business industry will also be analysed. The findings make it possible to identify the possible fields where companies need to be supported to enhance their commitments toward higher value added international activities and to accelerate internationalisation.

Legal supplement

Rethinking the trade obstacles aiming animal welfare in the WTO

BALÁZS HORVÁTHY

 The disputes between the European Union, and Canada, as well as Norway over  the  justification  of  EU  seal  products  ban  can  be  deemed  one  of  the  most significant  case  before  the  World  Trade  Organization  among  the  disputes  of  this year.  The  Appellate  Body’s  decision,  which  was  announced  in  summer  2014,  has specified the public morality exception of Article XX (a) GATT, shading more light on the requirements, which the Member States should meet if they are introducing restrictive  trade  measures  justified  by  some  ethical  reasons.  The  recent  decision helps  the  Member  States  apply  the  Article  XX  GATT  and  add  new  environmental components  to  the  scope  of  the  Article,  therefore  domestic  trade  regulations  on prohibition on inhumane treatment of animals, or cruel hunting methods come to be justified under the concept of public morality.

 The Private International Law Aspects Of Citizenship

OLIVÉR CZÉKMÁNY – DEZSŐ TAMÁS ZIEGLER

The   Office   of   Immigration   and   Nationality   and   the   Institute   for   Legal Studies  CSS  of  the  Hungarian  Academy  of  Sciences  (with  the  support  of  the Hungarian  Association  of  Police  Science  and  the  National  University  of  Public Service)  held  a  conference  about  the  scientific  questions  related  to  conflict-of-laws rules on citizenship on 9 November 2014. Several scholars and practitioners talked about the different aspects of nationality, including procedural law, family law and successional law  aspects  of  the  principle.  Since  the  lectures  covered  a  wide  range of  topics  and  slowly  but  surely  the  present  domestic  rules  of  private  international law must get revised, it seems to be useful to summarize the main statements of the lectures.

Squaring the circle? Government as venture capital investor

JUDIT KARSAI

Governments play several roles in the venture capital market. Based on empirical examples, the current paper focuses on the role of the government as a venture capital investor. Compared to the direct involvement of governments in investments entailing risks of market distortion, the paper demonstrates that governments increasingly contribute to the funds of the venture capital market in an indirect way: by encouraging private investors to participate. The involvement of private investors in government schemes could serve as a guarantee to select commercially viable projects without any political pressure, to schedule the financing of programs independently from election cycles, and to encourage experienced fund managers to participate in government programs. The main conclusion of the paper is that only those government-funded venture capital funds could ensure the proper utilization of public resources that are managed by the private sphere and are funded mostly by private investors. This would also contribute to economic policy objectives, such as improving the supply of capital for promising young companies.

In the squeeze of demand and supply Performance of the private equity market in Central and Eastern Europe since the beginning of the crisis

ÁLMOS MIKESY

 The level of development of the Central and Eastern European private equity market lagged behind the European average due to various supply and demand side reasons. Since the beginning of the crisis the region has lost from its importance for the investors, and the government agency could have filled this gap only partially. On the corporate side, the low level of investment readiness and openness to external investors are the two main obstacles of the development of the private equity market in the region. The determinants of the demand to employ external equity was analysed by binary logistic regression among Central and Eastern European micro, small and medium size enterprises. Data was derived from the European Commission Access to Finance survey conducted in 2013. According to our results the firms’ expectation about the equity supply proved to be the most important factor. The empirical analysis confirmed the existence of contraselection as well. Besides that, companies with improving credit history are more likely to plan to raise external equity.

Demographic transition, pension reforms and labor supply in the Auerbach– Kotlikoff models

GERGELY VARGA

 As in many countries in the developed world, demographic transition will impose a major impact onto the social security pension system and the macroeconomcy in Hungary. In the article I introduce the overlapping cohorts Auerbach–Kotlikoff- type models which are less frequently used in the domestic pension modelling. The models take into account the behaviorial and general equilibrium consequences of the demographic processes and the pension reforms along the simulation of the dmographic transition. Because of the primary importance of the relationship between the employment and the pension system, I highlight how the labor supply decision can be incorporated into the models.

Legal supplement

The history of the UN Security Council sanctions regarding North Korea

JUDIT PALLOS

The nuclear research and weapons program of the Democratic People’s Republic of Korea (North Korea) began with the paramount support of its biggest ally and sponsor, the Soviet Union, during the Cold War in the 1960’s. Within just a few years the socialist state of the Korean Peninsula had several nuclear reactors at its disposal, and also because of feeling threatened by the successful experimental nuclear deto- nation by China, advanced on to uranium enrichment, plutonium production and the designing of the nuclear payload delivery systems. In 1985, North Korea signed the Nuclear Non-Proliferation Treaty, however never complied with the obligations writ- ten in the contract and, in 2003, North Korea left the group of Signatories. The sud- den collapse of the Soviet Union had a devastating effect on Pyongyang, and as since felt the need to ensure its protection and survival from all global threats. Of course, there are other more complex reasons behind the war rhetoric of this refractory state as related to UN sanctions, which the present study will explain in a more detail.

The birth of the entrepreneur – episodes from the history of Schumpeter’s concept

ALADÁR MADARÁSZ

The entrepreneur is an elusive and ambiguous concept in economics. She is the key decision maker of capitalism based on private ownership and she provides the dynamic change through innovation. Despite of her vital role, modern economic theory mostly ignored the entrepreneur so she has become the missing protagonist of the neoclassical microeconomic discourse. The most influential conceptualization of entrepreneurship was designed by Schumpeter in 1912, synthetizing many different ideas suggested earlier by English, French and German economists. My essay gives an overview of some of these notions, illustrating the thesis that the importance of the Schumpeterian concept came not from the originality of his proposal but rather from casting the entrepreneur as the main agent of economic development. The idea of technological and organizational innovation initiated by the entrepreneur has recently regained the attention of economists and historians.

 Through a Glass Darkly The content of the statistical data on foreign direct investments

KATALIN ANTALÓCZY – MAGDOLNA SASS

 Together with globalisation, the role of foreign direct investments has been growing rapidly in the world economy as well as in individual countries. Thus their analysis is basically unavoidable when an economic phenomenon is investigated. As the main data source, the direct investment data of the balance of payments are used. However, the main aim of the balance of payments is to show how and in which form the foreign financing of an economy is realised. Thus its direct investment data do not necessarily correspond to the foreign direct investment concept of economic analysis. During the crisis, due to the reinforced tax-optimisation and loss-reducing transactions of multinational companies, the distance between the data and the analysed phenomenon has been further growing. That is why the main conclusion of our article is that one has to analyse the available data very carefully.

Expected impact of US-EU trade negotiations on the Hungarian economic growth

GÁBOR KUTASI – GERGELY REZESSY – NORBERT SZIJÁRTÓ

It is an economics assumption about the Trans-Atlantic Trade and Investment Partnership (TTIP) under formation since the beginning of 2013, that it has growth impacts on the participants. Our study estimates the additional effects of TTIP on growth, employment and investment in case of Hungary. Our calculations are built on computable general equilibrium (CGE) models based on price elasticity and trade elasticity. As far it was possible, the impacts were examined by sectors. Our results are compared with previous research results.

 Reindustrialization and its effects – Investigation into long-run structural change via a multi-sector macroeconomic model

GÁBOR ULIHA – JÁNOS VINCZE

In the wake of the recent global crisis reindustrialization became a possible economic policy target both in the European Union and in Hungary. In this paper the authors, using a long-run macroeconomic forecasting model, search for clues of “natural” reindustrializing tendencies in Hungary. One of their conclusion is that reindustrialization is probably forthcoming, but it will be accompanied by modest rates of growth. It seems unlikely that average GDP growth will exceed 3% per annum in the next 12 years, even if very optimistic conditions concerning export demand would materialize. They examine the aggregate impact of two specific “anti-industrializing” scenarios: in the first one consumption, and, in the second, exports shift relatively towards the service sectors. In both of these hypothetical cases growth and employment would be higher than in the baseline case, thus the final conclusion of the paper is that active reindustrialization may not be the most efficient policy option.

 Legal supplement

 Analysis of Directive 2011/24/EU on the application of patients’ rights in cross- border healthcare

ÉVA GELLÉRNÉ LUKÁCS – LAURA GYENEY

Besides providing an in-depth analysis of Directive 2011/24/EU on the appli- cation of patients’ rights in cross-border healthcare, the present Study intends to answer the question whether the Directive is just a mere codification of the related CJEU case-law in the field of European patient mobility, or rather a significant con- tribution to the attainment of the “idea of Social Europe”. The authors argue that the Directive meets the primary objective of creating a transparent and clear regulation for the reimbursement of health care costs in a Member State other than where the care was provided, laying down significant procedural guarantees for the substantive conditions of applications for prior authorisation. It is further argued that the Direc- tive, parallel to codifying the case-law, reinforces Member States’ national compe- tencies by empowering them to determine both the list of benefits subject to prior authorisation and the list of benefits that are subject to reimbursement. Moreover, the co-operation between Member States in the fields mentioned above operates on a highly voluntary basis. On the whole, we may conclude that the Directive has achieved a good balance between competing interests at the time of its adoption, potentially leading to the creation of a more integrated European health policy in the near future.

Economic instability and regional falling behind – Hungary’s case

GÁBOR OBLATH

Since the early 2000s Hungary’s economy has been characterised by larger macroeconomic instability than that of the other three Visegrád countries, which contributed to the disappointing economic growth performance of Hungary. Instability has manifested itself in large external and internal imbalances – leading to unsustainable increases in external and public debt –, high inflation and pro-cyclical fiscal policy. The inevitable policy measures aimed at correcting macroeconomic imbalances have led to a fall/stagnation in consumption, investments and productivity, hindering the convergence of the Hungarian economy to the more developed part of the European Union.

 The European Single Supervisory Mechanism

JÓZSEF TÓTH

 The European Parliament accepted the proposal of European Committee regarding Single Supervisory Mechanism in 2013 which brings significant changes in supervision of European banks from November 2014.   It is the first pillar of the Banking Union. Participation in the system is compulsory for each Euro zone country, but other EU members also can join the system. Large banks over certain total assets will directly supervised by European Central Bank.   Besides, the 3 most significant banks of each participating country will also directly supervised by ECB. Other banks remain under supervision of sovereigns but under indirect supervision of European Central Bank.The article deals with the operation of the bank supervisory mechanism, the rights and responsibilities of the participating countries and European Central Bank. Also, the article deals with the pros and cons of joining the Single Supervisory Mechanism.

 Crisis Management and Rise of Euroscepticism in Hungary and in the EU Causes, Schemes, Consequences

JÓZSEF PÉTER MARTIN

 A manifold crisis has unfolded in the recent years in the EU. If a crisis erupts, there also is a crisis consciousness among economic and political decision-makers and population. After having discussed the theoretical framework of elite’s and population’s perceptions and its link with public decision-making, this study elaborates on the crisis response of the EU, and how these policies are perceived by the population. What does the image about the EU depend on, and what is at stake if the perception about the EU is changing? Will the EU remain an “economic giant” and a “political dwarf ” after this crisis as it was before it? Where has the evil of euroscepticism nestled – into politics and/or into economy? The current analysis focuses on the new, Central and Eastern European members of the EU, primarily Hungary, and, secondly, on Poland. How is it possible that Hungary which happened to be an “eminent pupil” in the first decade after the change of regime fully supporting European integration, nowadays is falling behind not only the EU mainstream but also the CEE region? What are the political and economic reasons behind the rise of Hungarian euroscepticism? And what kind of interaction has been taking place between the assessment of the EU and the perception of economic situation? Do the hard facts reflect the population’s perception on the economy?

The socio-economic impacts of short food supply chains: a review

BENEDEK ZSÓFIA – BALÁZS BÁLINT

 Recent decades have seen an increasing interest in the analyses of local food and short food supply chains (SFSCs). The aim of this paper is to review the relevant academic literature to understand their potential socio-economic impacts. First, problems of conceptualisation related to the definition of SFSCs are investigated; then, the socio-economic impacts perceived by consumers and producers are characterized; and finally, the rural development potential is discussed. According to the results, it is hardly possible to provide evidence on SFSCs as effective policy tools in rural development, because of the context dependence of their socio- economic impacts. Still, we conclude that SFSCs seem to offer a way to increase social cohesion, to generate consumer demand for healthy food as well as to halt the depopulation of rural areas.

Legal supplement

Convention on International Sale of Goods

JUDIT GLAVANITS – DIÁNA RÁCZ

As sales contracts are the basis of international commerce, the codification and/or recodifycation of these legal institutions are not only crucial for legal advisors but for those who work in the international export business. The purpose of this article is the new Civil Code of Hungary coming to effect on 15th March 2014, which indicates changes in the whole civil law system. It is current and reasonable to investigate the connections of rules of the new Hungarian regime with the most commonly used international source, the Convention on  International  Sales  of  Goods  (CISG).  The study deals with the question of breach of contract, especially the fundamental breach, and the consequences of the breach in both texts, and the relevant international jurisdiction on this field. As a finding we can say it is very welcomed that the new general provisions of contract law in Hungary became much familiar to the international sources including CIGS, which will for sure facilitate to act in compliance with regulation for the parties of international trade.

Economic Analyses in Spring 2014

In springtime every year economic research institutes and other institutions publish their analysis about the performance of the previous year, as well as their forecasts. The press  usually informs only  about  the  most important economic data and about the analysis in a few words, the detailed studies prepared by the institutions do not reach those who are interested. This is the reason why since 2001 we have been publishing short summaries of the reports and prognoses made by research institutes. These analyses sum up the consequences of the economic policy, the tensions concerning the fiscal adjustments and structural reforms, the uncertain prospects of economic growth.

 Macroprudential Paradigm Shift in Hungarian Banking Regulation

KATALIN MÉRŐ – DÓRA PIROSKA

 Within the framework of macroprudential paradigm shift – which focuses on systemic risks to maintain financial stability – governments that had to intervene during the financial crisis now require banks to comply with more and stricter rules which makes banking more expensive. The new paradigm also empowers state institutions vis-à-vis the banking industry. The article analyzes the Hungarian case of the international paradigm shift in banking regulation in relation to changes in regulation and the institutional framework of supervision between 2008 and 2013. Its main findings are as follows: (1) the 2008 agreement between the Hungarian government and the IMF played an important role in the paradigm shift, (2) regulations enacted in the framework of the new paradigm made the Hungarian state institutions more powerful vis-à-vis the banking sector, (3) banks in Hungary were critical of changes due to one of the new paradigm’s inherent quality, namely that it makes banking more costly. Finally, solely on the basis of this analysis the theoretical question whether banking becomes more stable with the implementation of the macroprudential paradigm may not be answered definitely.

Role of Aid for Trade in enhancing the intra-trade of ECOWAS

BEÁTA UDVARI – KATALIN KIS

The Aid for Trade initiative has become one of the facilities of international development cooperation since 2005. Its objective is to improve the developing countries’ participation in world trade through developing the supply-side capacity in these countries. Since its launch, several analysis were born proving the positive impacts of Aid for Trade, however, it is not investigated – as far as we know – whether the Af T assistance may increase the trade within an economic integration. Thus, current study analyses whether Af T has contributed to the increase of the ECOWAS intra-trade, if yes, in what extent. The research is based on gravity model. Our results show that the Af T has a negative impact on the intra-trade of ECOWAS, meaning that the Af T may have trade diversion effect in certain integrations.

 Legal supplement

Contractual modification – change of circumstances under the new hungarian Civil Code and the Proposal of the Common European Sales Law (CESL)

GABRIELLA VINCZE, DR.

As long as the European Union strives to find new ways in unification in the field of contract law, the hungarian legislation had proceeded too, in the last few years, and achieved a comprehensive legal work: the new hungarian Civil Code. This study analyses and tries revealing the connection between the newest legal instruments of the European Union and Hungary, as a Member State, through the regulation of modifying of contracts because of change of circumstances (clausula rebus sic stantibus). The foreground and antecedents of this legal institution are taken into account, as well as principles and rules of the substantive law of contract, recognised interna- tionally or in the European Union. Nevertheless, the main line of the study is about the comparison between the Commission’s Proposal of the Common European Sales Law, and the new hungarian Civil Code.

Inquiry on the economic role of the state

In the past three-and-a half years the character and boundaries of the state’s economic role has been radically altered by extending its influence. The state as owner and regulator has itself changed: the system of checks and balances has stopped operating. The systemic changes include the followings: The state exercise preferential (or non-preferential) treatment of particular economic branches (or products and services) and groups of asset owners. State ownership has been increased and the influence of the state has been extended towards new economic fields. Decentralized decision-making centres have been eliminated while decision- making competencies have been centralized. A novelty is the alteration of the institutional framework of regulation (the limitation of the power of regulatory bodies); the frequent revisions of the constitutional role of the state, mostly in the direction of extension; the broadening state regulation of prices, as well as – for instance in the financial sector and with respect to public utilities – the deviation of regulations from the norms of market economies.

 Based on this, our questions are the following:

 1. What specific problems can one identify with respect to the governmental, owner and regulatory role of the state in the 1990–2000s, and what additional difficulties have been encountered as results of the post-2008 global economic developments? While answering this question, one does not have to focus on the most recent developments.

2. What solutions can be proposed to address these problems, similar or dissimilar to the ones being applied? In other words, in which specific fields the rethinking (and the redefinition) of the role of the state is justified and unjustified?

Reorientation of the Hungarian monetary policy

ÉVA VÁRHEGYI

To cushion the impact of the crisis leading central banks pumped large amounts of money into their economies. At first only cautiously to relieve the shortage of liquidity and to restore financial stability, later more and more to stimulate the economy and to increase employment. With a moderate tendency of spending money creation did not threaten with inflation, so central banks reaching zero interest rate applied unconventional monetary easing methods. The renewed leadership of the National Bank of Hungary from the spring of 2013 tries to stimulate economic growth by using similar monetary policy methods. The long term effects of these unconventional means can not be forseen clearly even in developed countries, and even more difficult to assess the effectiveness and risk of them in Hungary, where the economic situation is different in many ways.

  European economic research institutes about year 2014

KATALIN NAGY – PÉTER VAKHAL

The Association of European Conjuncture Institutes (AIECE) publishes two reports in each year regarding the European economic outlook. In their latest report the researchers forecasted moderated economic growth around 1 percentage led by export and investments for 2014. That slight GDP increase is accompanied by low inflation rates. At the same time the growth lags behind the potential rates and log- term sustainability is also uncertain. High sovereign debt ratios and volatile prices of raw materials are the highest risks for the region. According to the researchers the further deepening of the integration is unquestionable and all member states should participate in it.

Legal supplement

The Common European Sales Law (CESL) and the Vienna Sales Convention (CISG)

SAROLTA SZABÓ

This article examines the relationship between the United Nations Convention on  Contracts  for  the  International  Sale  of  Goods  (CISG)  of  1980  and  the  Proposal for  a Common European Sales Law (CESL) which was published on 11  October

2011  and  attempts  to  compare  both  instruments.  The  introduction  of  a  European instrument for cross-border commercial sales contracts would inserts a new, regio- nal instrument between the divergent national laws of the Member States and the international  sales  convention.  It  is  questionable  therefore,  that  the  business  world would prefer another legal instrument or not? That is why essentially important to analyze the major differences between the CISG and the CESL focus on the goals, the opt-in and opt-out approach, the scope of application and the style of regulation of both sets of rules.