IDEAS home Printed from https://ideas.repec.org/p/cvh/coecwp/2017-01.html
   My bibliography  Save this paper

Funding Hungary: Exposing Normal and Dysfunctional Crisis Management

Author

Listed:
  • Piroska, Dóra

Abstract

This paper contrasts the approaches of the International Monetary Fund, the European Commission and the European Central Bank to the management of the Hungarian financial crisis of 2008. It exposes normal behaviour of the IMF and the EU Commission and dysfunction on the part of the ECB, during the first liquidity trap phase of the global financial crisis. The methodology applied contrasts the IOs’ mandate with their framing of the Hungarian crisis as well as with their actual policy recommendations. It uncovers that the IMF negotiating team had a market focus, stressed the European and regional dimensions of the Hungarian crisis, and recommended large financial assistance. The Commission’s Directorate-General for Economic and Financial Affairs representatives focused on the budgetary imbalances and treated the crisis primarily as a Hungarian crisis, which has the potential of contaminating the whole EU. They provided moderate financial assistance. Finally, the ECB thought to combat contagion to the Eurozone by ignoring the European dimension of the Hungarian case. It was reluctant to provide significant assistance to an EU member state, whose banking sector is dominated by Eurozone banks. It concludes with a note on the possible negative consequences of the ECB’s action on the European Union’s integration.

Suggested Citation

  • Piroska, Dóra, 2017. "Funding Hungary: Exposing Normal and Dysfunctional Crisis Management," Corvinus Economics Working Papers (CEWP) 2017/01, Corvinus University of Budapest.
  • Handle: RePEc:cvh:coecwp:2017/01
    as

    Download full text from publisher

    File URL: https://unipub.lib.uni-corvinus.hu/2645/
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. André Broome & Leonard Seabrooke, 2012. "Seeing like an International Organisation," New Political Economy, Taylor & Francis Journals, vol. 17(1), pages 1-16.
    2. Manuela Moschella, 2016. "Negotiating Greece. Layering, insulation, and the design of adjustment programs in the Eurozone," Review of International Political Economy, Taylor & Francis Journals, vol. 23(5), pages 799-824, September.
    3. Dorothee Bohle, 2014. "Post-socialist housing meets transnational finance: Foreign banks, mortgage lending, and the privatization of welfare in Hungary and Estonia," Review of International Political Economy, Taylor & Francis Journals, vol. 21(4), pages 913-948, August.
    4. Paul Krugman, 1999. "Balance Sheets, the Transfer Problem, and Financial Crises," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(4), pages 459-472, November.
    5. Susanne L�tz & Matthias Kranke, 2014. "The European rescue of the Washington Consensus? EU and IMF lending to Central and Eastern European countries," Review of International Political Economy, Taylor & Francis Journals, vol. 21(2), pages 310-338, April.
    6. Barnett, Michael N. & Finnemore, Martha, 1999. "The Politics, Power, and Pathologies of International Organizations," International Organization, Cambridge University Press, vol. 53(4), pages 699-732, October.
    7. Rickard, Stephanie J. & Caraway, Teri L., 2014. "International Negotiations in the Shadow of National Elections," International Organization, Cambridge University Press, vol. 68(3), pages 701-720, July.
    8. Francesco Saraceno, 2016. "The ECB: a reluctant leading character of the EMU play," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(2), pages 129-151, August.
    9. Carlos Rodriguez & Carlos A. Carrasco, 2014. "ECB Policy Responses between 2007 and 2014: a chronological analysis and a money quantity assessment of their effects," Working papers wpaper65, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dorothee Bohle, 2017. "Mortgaging Europe’s periphery," LEQS – LSE 'Europe in Question' Discussion Paper Series 124, European Institute, LSE.
    2. Stephen Kaplan & Sujeong Shim, 2021. "Global Contagion and IMF Credit Cycles: A Lender of Partial Resort?," Working Papers 2021-13, The George Washington University, Institute for International Economic Policy.
    3. Angelos Angelou, 2023. "Dysfunction and Pathology in Brussels: The European Commission and the Politics of Debt Restructuring," Journal of Common Market Studies, Wiley Blackwell, vol. 61(4), pages 1082-1099, July.
    4. Steininger, Lea & Hesse, Casimir, 2024. "Buying into new ideas: The ECB’s evolving justification of unlimited liquidity," Department of Economics Working Paper Series 357, WU Vienna University of Economics and Business.
    5. Sebnem Kalemli-Ozcan & Herman Kamil & Carolina Villegas-Sanchez, 2016. "What Hinders Investment in the Aftermath of Financial Crises: Insolvent Firms or Illiquid Banks?," The Review of Economics and Statistics, MIT Press, vol. 98(4), pages 756-769, October.
    6. Pratap, Sangeeta & Urrutia, Carlos, 2004. "Firm dynamics, investment and debt portfolio: balance sheet effects of the Mexican crisis of 1994," Journal of Development Economics, Elsevier, vol. 75(2), pages 535-563, December.
    7. Rotunno, Lorenzo, 2016. "Political stability and trade agreements: Evidence for ‘endgame FTAs’," European Journal of Political Economy, Elsevier, vol. 45(C), pages 133-148.
    8. Alessandro Moro, 2021. "Can capital controls promote green investments in developing countries?," Temi di discussione (Economic working papers) 1348, Bank of Italy, Economic Research and International Relations Area.
    9. Gianluca Benigno & Huigang Chen & Christopher Otrok & Alessandro Rebucci & Eric R. Young, 2023. "Optimal Policy for Macrofinancial Stability," American Economic Journal: Macroeconomics, American Economic Association, vol. 15(4), pages 401-428, October.
    10. Kohn, David & Leibovici, Fernando & Szkup, Michal, 2020. "Financial frictions and export dynamics in large devaluations," Journal of International Economics, Elsevier, vol. 122(C).
    11. Itay Goldstein, 2005. "Strategic Complementarities and the Twin Crises," Economic Journal, Royal Economic Society, vol. 115(503), pages 368-390, April.
    12. Eijffinger Sylvester C. W. & Goderis Benedikt, 2007. "Currency Crises, Monetary Policy and Corporate Balance Sheets," German Economic Review, De Gruyter, vol. 8(3), pages 309-343, August.
    13. Adela Toscano-Valle & Antonio Sianes & Francisco Santos-Carrillo & Luis A. Fernández-Portillo, 2022. "Can the Rational Design of International Institutions Solve Cooperation Problems? Insights from a Systematic Literature Review," Sustainability, MDPI, vol. 14(13), pages 1-22, June.
    14. Stijn Claessens & M. Ayhan Kose, 2013. "Financial Crises: Explanations, Types and Implications," CAMA Working Papers 2013-06, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    15. Ashis Kumar Pradhan & Gourishankar S Hiremath, 2020. "Do external commercial borrowings and financial development affect exports?," Cogent Business & Management, Taylor & Francis Journals, vol. 7(1), pages 1796269-179, January.
    16. I.Igal Magendzo, 2002. "Are Devaluations Really Contractionary?," Working Papers Central Bank of Chile 182, Central Bank of Chile.
    17. Antonio Cabrales & Piero Gottardi & Fernando Vega-Redondo, 2017. "Risk Sharing and Contagion in Networks," The Review of Financial Studies, Society for Financial Studies, vol. 30(9), pages 3086-3127.
    18. Fernandez-Arias, Eduardo & Hausmann, Ricardo, 2001. "Is foreign direct investment a safer form of financing?," Emerging Markets Review, Elsevier, vol. 2(1), pages 34-49, March.
    19. Javier Gómez Pineda, 2004. "A Framework for Macroeconomic Stability in Emerging Market Economies," Borradores de Economia 320, Banco de la Republica de Colombia.
    20. Enisse Kharroubi, 2004. "Macroeconomic Volatility and endogenous debt maturity choice," Money Macro and Finance (MMF) Research Group Conference 2004 22, Money Macro and Finance Research Group.

    More about this item

    Keywords

    Hungary; International Monetary Fund; European Union; European Central Bank; international organisation; global financial crisis; institutional dysfunction;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • G01 - Financial Economics - - General - - - Financial Crises
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cvh:coecwp:2017/01. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Adam Hoffmann (email available below). General contact details of provider: https://edirc.repec.org/data/bkeeehu.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.