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Budgetary Risks of Monetary Policy with Special Regard to the Debt Rule

Author

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  • Pulay, Gyula
  • Máté, János
  • Németh, Ildikó
  • Zelei, Andrásné

Abstract

Within its scope of activities the State Audit Office carries out a systematic analysis of factors that pose a risk to meeting the public debt rule criteria. The present article is based on the SAO study, conducted as part of the above-mentioned activities with the aim of exploring the budgetary risks of the monetary policy. The starting point of our study is the fact that the loss or negative reserves of the National Bank of Hungary must be replenished from the central budget. We demonstrate that the result of the central bank is mostly influenced by monetary policy instruments and show that the related interest expenditure has increased considerably since 2009. Furthermore, we conclude that accumulating foreign currency reserves also poses a significant risk. By analysing Hungarian and international data, we point out potential solutions for mitigating these risks. We go on to argue that budgetary payment obligations may also result from positive economic processes; therefore it would be advisable to change the calculation method of the debt rule in order to better manage the budgetary risks of the monetary policy.

Suggested Citation

  • Pulay, Gyula & Máté, János & Németh, Ildikó & Zelei, Andrásné, 2013. "Budgetary Risks of Monetary Policy with Special Regard to the Debt Rule," Public Finance Quarterly, Corvinus University of Budapest, vol. 58(1), pages 11-34.
    • Handle: RePEc:pfq:journl:v:58:y:2013:i:1:p:11-34
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    File URL: https://unipub.lib.uni-corvinus.hu/8961/
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    References listed on IDEAS

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    1. Judit Antal & Gyula Barabás & Tamás Czeti & Klára Major, 2001. "Liquidity management operations at the National Bank of Hungary," MNB Occasional Papers 2001/9, Magyar Nemzeti Bank (Central Bank of Hungary).
    2. Csaba Balogh, 2009. "The role of MNB bills in domestic financial markets. What is the connection between the large volume of MNB bills, bank lending and demand in the government securities markets?," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), vol. 4(3), pages 6-13, October.
    3. Zoltán Molnár, 2010. "About the interbank HUF liquidity – what does the MNB’s new liquidity forecast show?," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), vol. 5(4), pages 24-32, December.
    4. Lóránt Varga, 2010. "Introducing optional reserve ratios in Hungary," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), vol. 5(3), pages 57-66, October.
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    Citations

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    Cited by:

    1. R. Kolesov V. & A. Tarasova J. & G. Kozlov E. & Р. Колесов В. & А. Тарасова Ю. & Г. Козлов Е., 2019. "Прогнозирование уровня инфляции при формировании региональных и муниципальных бюджетов // The Inflation Level Forecasting in Forming Regional and Municipal Budgets," Экономика. Налоги. Право // Economics, taxes & law, ФГОБУ "Финансовый университет при Правительстве Российской Федерации" // Financial University under The Government of Russian Federation, vol. 12(4), pages 102-110.

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    More about this item

    Keywords

    monetary policy; budgetary risk; foreign currency reserves; debt rule;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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