Author:
Dóra Siklós European Stability Mechanism (ESM), Budapest, Hungary

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The main purpose of this paper is twofold. First, it aims to estimate the effect of the tightening of regulatory capital requirements on the real economy in periods of credit upswing. Second, it intends to show whether applying a counter-cyclical capital buffer measure as set down in the Basel III rules could have helped to reduce the pace of FX lending growth in Hungary, mitigating the buildup of vulnerabilities in the run-up to the global financial crisis. In order to answer these questions, we use a Vector Autoregression-based approach with the aim of understanding the impact of shocks to capital adequacy in the pre-crisis period. Our results suggest that although regulatory authorities could have slowed down the increase in lending temporarily, they would not have been able to avoid the upswing of FX lending by requiring counter-cyclical capital buffers even if such a tool had been available and even if they had reacted quickly to accelerating credit growth. Our results also suggest that a more pronounced tightening might have reduced FX lending substantially, but at the expense of real GDP growth. The reason is that unsustainable fiscal policy led to a trade-off between economic growth and the build-up of new vulnerabilities in the form of FX lending.

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Senior editors

Editors-in-Chief: István P. Székely, Dóra Győrffy

Editor(s): Judit Kálmán

Associate Editors

  • Péter Benczúr, Joint Joint Research Center, European Commission
  • Dóra Benedek, International Monetary Fund
  • Balázs Égert, OECD
  • Dániel Prinz, World Bank
  • Rok Spruk, University of Ljubljana, School of Economics and Business, Slovenia

Editorial Board

  • Anders Åslund, Georgetown University and Advisory Council of CASE, USA
  • István Benczes, Corvinus University of Budapest, Hungary 
  • Agnieszka Chłoń-Domińczak, SGH Warsaw School of Economics, Poland
  • Fabrizio Coricelli, University of Siena, Italy
  • László Csaba, Corvinus University of Budapest, Hungary and Central European University, Austria
  • Beáta Farkas, Faculty of Economics and Business Administration, University of Szeged, Hungary
  • Péter Halmai, Budapest University of Technology and Economics, and National University of Public Service, Hungary
  • Martin Kahanec, Central European University, Austria
  • David Kemme, University of Memphis, USA
  • Michael Landesmann, The Vienna Institute for International Economic Studies (WIIW), Austria
  • Péter Mihályi, Corvinus University of Budapest, Hungary
  • Debora Revoltella, European Investment Bank

Corvinus University of Budapest
Department of Economics
Fővám tér 8 Budapest, H-1093, Hungary
E-mail: judit.kalman@uni-corvinus.hu

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2024  
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2023  
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Acta Oeconomica
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Acta Oeconomica
Language English
Size B5
Year of
Foundation
1966
Volumes
per Year
1
Issues
per Year
4
Founder Magyar Tudományos Akadémia
Founder's
Address
H-1051 Budapest, Hungary, Széchenyi István tér 9.
Publisher Akadémiai Kiadó
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Address
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Responsible
Publisher
Chief Executive Officer, Akadémiai Kiadó
ISSN 0001-6373 (Print)
ISSN 1588-2659 (Online)