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Wealth portfolio of Hungarian households – Urban legends and facts

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Author Info

  • Gábor Vadas

    ()
    (Magyar Nemzeti Bank)

Abstract

As significant part of national wealth, households’ wealth is the central issue in both policy debate and academic literature. Nevertheless, in Hungary little effort has been made so far to conduct thorough evaluation of households’ wealth for the last decade. Under the auspices of ‘the plural of anecdote is not evidence’ axiom, this study provides a formal evaluation of Hungarian wealth and connects the development of wealth elements to economic events. Doing so, as a by-product, we also display the estimated wealth levels of households. Based on international comparison and econometric techniques, it is confirmed that the recent financial wealth level of Hungarian households is still relatively low, meanwhile the current housing wealth is not evidently below the equilibrium level. These results provide an explanation why governmental housing subsidy scheme has its major effect on house prices rather than housing stock. Besides, the soaring house prices, via housing loans, vanished financial savings. The ‘saving disaster’, i.e. small or in some periods even negative saving rates, experienced in early 2000’s, to a certain extent, is the other side of the ‘saving miracle’ of early and mid 90’s when households rearranged their wealth portfolio from real assets to financial assets implying decreasing house prices and high saving rate.

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Bibliographic Info

Paper provided by Magyar Nemzeti Bank (the central bank of Hungary) in its series MNB Occasional Papers with number 2007/68.

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Length: 33 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:mnb:opaper:2007/68

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Keywords: household wealth; housing subsidy scheme; house price.;

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References

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  1. Cappiello, Lorenzo & Gérard, Bruno & Kadareja, Arjan & Manganelli, Simone, 2006. "Financial integration of new EU Member States," Working Paper Series 0683, European Central Bank.
  2. Carlos González-Aguado & Max Bruche, 2006. "Recovery Rates, Default Probabilities and the Credit Cycle," FMG Discussion Papers dp572, Financial Markets Group.
  3. Ross Levine, 2004. "Finance and Growth: Theory and Evidence," NBER Working Papers 10766, National Bureau of Economic Research, Inc.
  4. Amato, Jeffery D. & Furfine, Craig H., 2004. "Are credit ratings procyclical?," Journal of Banking & Finance, Elsevier, vol. 28(11), pages 2641-2677, November.
  5. Caterina Mendicino, 2006. "Credit Market and Macroeconomic Volatility," 2006 Meeting Papers 317, Society for Economic Dynamics.
  6. Laeven, Luc & Majnoni, Giovanni, 2001. "Loan loss provisioning and economic slowdowns : too much, too late?," Policy Research Working Paper Series 2749, The World Bank.
  7. Lieven Baele & Annalisa Ferrando & Peter Hördahl & Elizaveta Krylova & Cyril Monnet, 2004. "Measuring financial integration in the euro area," Occasional Paper Series 14, European Central Bank.
  8. Inês Cabral & Frank Dierick & Jukka Vesala, 2002. "Banking integration in the euro area," Occasional Paper Series 06, European Central Bank.
  9. Nickell, Pamela & Perraudin, William & Varotto, Simone, 2000. "Stability of rating transitions," Journal of Banking & Finance, Elsevier, vol. 24(1-2), pages 203-227, January.
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Citations

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Cited by:
  1. Mihályi, Péter, 2008. "Gazdaságunk mai ellentmondásainak eredete
    [The origin of the present inconsistencies in the Hungarian economy]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 193-217.
  2. Elek, Péter & Kiss, Áron, 2010. "Az ingatlanadó a magyar adórendszerben. Elméleti megfontolások és mikroszimulációs elemzés
    [Real-estate taxation in the Hungarian tax system. Theoretical considerations and a micro-simulati
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 389-411.
  3. Hudecz, András, 2012. "Párhuzamos történetek. A lakossági devizahitelezés kialakulása és kezelése Lengyelországban, Romániában és Magyarországon
    [Parallel stories. The development and treatment of household
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 349-411.
  4. Bethlendi, András, 2007. "A hitelpiac szerepe a hazai háztartások fogyasztási és megtakarítási döntéseiben
    [The role of the credit market in consumption and saving decisions of Hungarian households]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1041-1065.

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