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Burdensome Legacy – Political and Economic Changes Through the Glasses of a Financial Policy Maker

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  • Botos, Katalin

Abstract

The political and economic changes 25 years ago left a burdensome legacy with an impact still felt today. This legacy includes the huge national debt and the failure to complete a price and wage reform. This study aims to dispel myths about the first government failing to request debt forgiveness and prove that making such a request was not a viable option during the first years of the changes. It shows that there were some initial ideas about implementing a wage and price reform, because wages did not include many cost items commonly integrated into them in a market economy including housing, healthcare and education. Interestingly, the study proves that it would have been possible to carry out a reform in 1990 by increasing wages and reducing contributions at the same time. As this did not happen, Hungarian wage levels remained low compared to those in Western Europe. As a result, the “reform” of large systems was confined to hard-to-implement austerity measures resulting in lower living standards.

Suggested Citation

  • Botos, Katalin, 2015. "Burdensome Legacy – Political and Economic Changes Through the Glasses of a Financial Policy Maker," Public Finance Quarterly, Corvinus University of Budapest, vol. 60(4), pages 482-491.
    • Handle: RePEc:pfq:journl:v:60:y:2015:i:4:p:482-491
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    File URL: https://unipub.lib.uni-corvinus.hu/8829/
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    More about this item

    Keywords

    tax cut; wages and price reform; reforming large systems;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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