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Developments in Government Interest Expenditure for Hungary, 2000–2015

Author

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  • Gergely Kicsák

    (Magyar Nemzeti Bank (Central Bank of Hungary))

Abstract

In this study, we examine the changes in interest expenditure between 2000 and 2015, and in this context, focus particularly on analysing the impact of decreasing yields on the government securities market observed over the past three years. The annual change in interest expenditure can be categorised into several factors based on a methodology similar to the decomposition of government debt, and the summary discloses the details of the trends characterising the four periods which can be distinguished over the past 15 years. From among these factors, we gave precedence to the analysis of the changes in yields as this factor exerts a stronger influence on the developments in interest expenditure than any other factor. Based on a regional comparison, in addition to a supportive international environment, domestic factors have also strongly affected the favourable developments of the government securities market in recent years. From the Hungarian developments, we should highlight the fact that interest rate cuts together with the Self-financing Programme, which mitigated Hungary’s external vulnerability, has had a tangible impact on the developments in Hungarian government securities’ yields, and as such, due to the substantial contraction in interest expenditure, exerted a favourable effect on the balance of the general government. Finally, we also present the imputed interest expenditure entailed by the reorganisation of the pension system, and the study argues that these should be managed separately from actual interest expenditure.

Suggested Citation

  • Gergely Kicsák, 2017. "Developments in Government Interest Expenditure for Hungary, 2000–2015," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 16(1), pages 46-73.
    • Handle: RePEc:mnb:finrev:v:16:y:2017:i:1:p:46-73
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    References listed on IDEAS

    as
    1. Ardagna Silvia & Caselli Francesco & Lane Timothy, 2007. "Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-35, August.
    2. Gergely Baksay & Ferenc Karvalits & Zsolt Kuti, 2012. "The impact of public debt on foreign exchange reserves and central bank profitability: the case of Hungary," BIS Papers chapters, in: Bank for International Settlements (ed.), Fiscal policy, public debt and monetary policy in emerging market economies, volume 67, pages 179-191, Bank for International Settlements.
    3. Gergely Baksay & Tamás Berki & Iván Csaba & Emese Hudák & Tamás Kiss & Gergely Lakos & Zsolt Lovas & Gábor P. Kiss, 2013. "Developments in public debt in Hungary between 1998 and 2012: trends, reasons and effects," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), vol. 8(Special), pages 14-22, October.
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    More about this item

    Keywords

    general government; interest expenditure; monetary policy;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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