IDEAS home Printed from
   My bibliography  Save this article

Trends in the liquidity of Hungarian financial markets – What does the MNB’s new liquidity index show?


  • Judit Páles

    () (Magyar Nemzeti Bank (central bank of Hungary))

  • Lóránt Varga

    () (Magyar Nemzeti Bank (central bank of Hungary))


The Magyar Nemzeti Bank measures the trends in the liquidity of Hungarian financial markets by means of a liquidity index and a related set of liquidity sub-indices. These liquidity indices relate to the four most important domestic financial markets (the EUR/HUF spot foreign exchange market, the USD/HUF FX swap market, the secondary market of Hungarian government bonds and the interbank unsecured money market), and are based on indicators that quantify the different dimensions of market liquidity (bid-ask spread, return-to-volume ratio, average size of transactions, number of transactions). The timeliness of this topic is supported by the fact that, in relation to the impact of the US sub-prime crisis, analysts and experts have started to focus their attention on the development of financial market liquidity again. Until mid-2006, the liquidity of Hungary’s domestic financial markets increased steadily, but in 2007 the trend-like growth in liquidity ceased. Looking at the last period of more than a half year, the liquidity of Hungarian financial markets fell suddenly several times during the turbulent periods. The magnitude of the decline was particularly considerable in the period of the government bond market liquidity problems in early March 2008. In these periods, the decline in liquidity was mainly attributable to a decline in market tightness, i.e. to an increase in the costs of trading, while market turnover usually did not decline significantly.

Suggested Citation

  • Judit Páles & Lóránt Varga, 2008. "Trends in the liquidity of Hungarian financial markets – What does the MNB’s new liquidity index show?," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), vol. 3(1), pages 44-51, April.
  • Handle: RePEc:mnb:bullet:v:3:y:2008:i:1:p:44-51

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. László Békési & Lorant Kaszab & Szabolcs Szentmihályi, 2017. "The EAGLE model for Hungary - a global perspective," MNB Working Papers 2017/7, Magyar Nemzeti Bank (Central Bank of Hungary).
    2. Adam Geršl & Zlatuše Komárková, 2009. "Liquidity Risk and Banks’ Bidding Behavior: Evidence from the Global Financial Crisis," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(6), pages 577-592, December.
    3. Klára Pintér & György Pulai, 2009. "Measuring interest rate expectations from market yields: topical issues," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), vol. 4(2), pages 34-42, July.
    4. Judit Krekó & Csaba Balogh & Kristóf Lehmann & Róbert Mátrai & György Pulai & Balázs Vonnák, 2013. "International experiences and domestic opportunities of applying unconventional monetary policy tools," MNB Occasional Papers 2013/100, Magyar Nemzeti Bank (Central Bank of Hungary).
    5. Tibor Szendrei & Katalin Varga, 2017. "FISS - A Factor Based Index of Systemic Stress in the Financial System," MNB Working Papers 2017/9, Magyar Nemzeti Bank (Central Bank of Hungary).
    6. Ãdám Banai & András Kollarik & András Szabó-Solticzky, 2014. "The Network Topology of the Hungarian Short-Term Foreign Exchange Swap Market," Research in Economics and Business: Central and Eastern Europe, Tallinn School of Economics and Business Administration, Tallinn University of Technology, vol. 6(2).
    7. Júlia Király & Márton Nagy & Viktor E. Szabó, 2008. "Contagion and the beginning of the crisis – pre-Lehman period," MNB Occasional Papers 2008/76, Magyar Nemzeti Bank (Central Bank of Hungary).
    8. Gergely Fábián & Róbert Mátrai, 2012. "Unconventional central bank instruments in Hungary," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), vol. 7(2), pages 14-23, June.
    9. Dániel Holló, 2012. "A system-wide financial stress indicator for the Hungarian financial system," MNB Occasional Papers 2012/105, Magyar Nemzeti Bank (Central Bank of Hungary).

    More about this item


    market liquidity; financial markets; bid-ask spread; market turnover.;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets


    Access and download statistics


    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:mnb:bullet:v:3:y:2008:i:1:p:44-51. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maja Bajcsy). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.