IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/40357.html
   My bibliography  Save this paper

The deficit mechanism of the Hungarian municipalities

Author

Listed:
  • Vasvári, Tamás

Abstract

The management of the Hungarian municipal sector has received special attention since the crisis in 2008 and interest in the sector increased further due to the changes in legislation in 2011. A great number of economy experts and speakers on behalf of the government or the municipalities provided further details on prevailing issues in the municipal sector, however, their assessment of the severity of these issues varied greatly. By describing the logical framework of the deficit mechanism this study aims to evaluate the processes behind the situation of today in order to forecast the situation of tomorrow as regards the management of municipalities. According to the mechanism, if the deficit of a municipal budget (the operating, investment, financing budget or reserves) can only be eliminated by the upward adjustment of financing revenues, it will lead, in the end to increasing municipal indebtedness. Increasing indebtedness, as a rule, results in increasing debt service. Although these expenditures are part of the financing budget, in practice they are usually financed from other budgets. Therefore, increasing debt service can be a potential cause of reorganization in operation, the postponement of investments, an increasing asset disposal activity, refinancing with new borrowings or a drop in reserves. In addition to these, the phenomenon called the crowding out effect of debt service may at the same time improve the GFS balance of municipalities.

Suggested Citation

  • Vasvári, Tamás, 2012. "The deficit mechanism of the Hungarian municipalities," MPRA Paper 40357, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:40357
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/40357/1/MPRA_paper_40357.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dániel Homolya & Gábor Szigel, 2008. "Lending to local governments: Risks and behaviour of Hungarian banks," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), vol. 3(2), pages 20-29, September.
    2. Ákos Aczél & Dániel Homolya, 2011. "Risks of the indebtedness of the local government sector from the point of view of financial stability," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), vol. 6(3), pages 7-14, October.
    3. Judit Páles & Dániel Homolya, 2011. "Developments in the costs of external funds of the Hungarian banking sector," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), vol. 6(3), pages 61-69, October.
    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. Szabolcs Szikszai & Tamás Badics & Csilla Raffai & Zsolt Stenger & András Tóthmihály, 2013. "Studies in Financial Systems No 8 Hungary," FESSUD studies fstudy08, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    2. Gál, Erzsébet, 2011. "Is It Necessary to Regulate Local Governments’ Borrowing? – The Lessons of the Hungarian Case," Public Finance Quarterly, Corvinus University of Budapest, vol. 56(1), pages 125-146.
    3. Dóra Siklós, 2016. "Capital Adequacy Regulations in Hungary: Did It Really Matter?," Working Papers 11, European Stability Mechanism.
    4. Aczél, Ákos & Homolya, Dániel, 2012. "Risks of the indebtedness of the Hungarian local government sector from a financial stability point of view," MPRA Paper 40345, University Library of Munich, Germany.

    More about this item

    Keywords

    municipality; indebtedness; debt service; deficit-mechanism; crowd-out effect;
    All these keywords.

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

    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:pra:mprapa:40357. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.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.