Market reform and fiscal laxity in Communist and post-Communist Hungary: A path-dependent approach

Purpose – The purpose of this paper is to present a conceptual framework in order to analyse and understand the twin developments of successful microeconomic reform on the one hand and failed macroeconomic stabilisation attempts on the other hand in Hungary. The case study also attempts to explore the reasons why Hungarian policymakers were willing to initiate reforms in the micro sphere, but were reluctant to initiate major changes in public finances both before and after the regime change of 1989/1990. Design/methodology/approach – The paper applies a path-dependent approach by carefully analysing Hungary's Communist and post-Communist economic development. The study restricts itself to a positive analysis but normative statements can also be drawn accordingly. Findings – The study demonstrates that the recent deteriorating economic performance of Hungary is not a recent phenomenon. By providing a path-dependent explanation, it argues that both Communist and post-Communist governments used the general budget as a buffer to compensate the losers of economic reforms, especially microeconomic restructuring. The gradualist success of the country – which dates back to at least 1968 – in the field of liberalisation, marketisation and privatisation was accompanied by a constant overspending in the general government. Practical implications – Hungary has been one of the worst-hit countries of the 2008/2009 financial crisis, not just in Central and Eastern Europe but in the whole world. The capacity and opportunity for strengthening international investors' confidence is, however, not without doubts. The current deterioration is deeply rooted in failed past macroeconomic management. The dissolution of fiscal laxity and state paternalism in a broader context requires, therefore, an all-encompassing reform of the general government, which may trigger serious challenges to the political regime as well. Originality/value – The study aims to show that a relatively high ratio of redistribution, a high and persistent public deficit and an accelerated indebtedness are not recent phenomena in Hungary. In fact, these trends characterised the country well before the transformation of 1989/1990, and have continued in the post-socialist years, too. To explain such a phenomenon, the study argues that in the last couple of decades the hardening of the budget constraint of firms have come at the cost of maintaining the soft budget constraint of the state.

No more free beer tomorrow? Economic policy and outcomes in Australia and New Zealand since 1984

There are no controlled experiments in macroeconomic policy, nor in systematic programs of microeconomic reform, but a comparison between New Zealand and Australia over the period since 1984 provides as close an approach to such an experiment as is ever likely to be possible. From quite similar starting points the two countries pursued liberal reform programs that differed sharply, mainly as a result of exogenous differences in constitutional structures and the personal styles of the central actors. Australia followed a more cautious, piecemeal, consensus-based approach, whereas New Zealand, in contrast, adopted a radical, rapid, 'purist' platform. The NZ reform package was generally seen by contemporary commentators as representing a 'textbook' model for best practice reform. However, Australia since 1984 has performed much better than New Zealand, whose per capita GDP growth indeed ranked at or near the bottom of the OECD. In this paper, we assess a variety of explanations for the divergences in policies and outcomes.

Investment and economic reform in Latin America

Includes bibliography

Making infrastructure reform in Latin America work for the poor

Includes bibliography

Market reform and state paternalism in Hungary: a path-dependent approach

Hungary is one of the worst-hit countries of the current financial crisis in Central and Eastern Europe. The deteriorating economic performance of the country is, however, not a recent phenomenon. A relatively high ratio of redistribution, a high and persistent public deficit and accelerated indebtedness characterised the country not just in the last couple of years but also well before the transformation, which also continued in the postsocialist years. The gradualist success of the country – which dates back to at least 1968 – in the field of liberalisation, marketisation and privatisation was accompanied by a constant overspending in the general government. The paper attempts to explore the reasons behind policymakers’ impotence to reform public finances. By providing a path-dependent explanation, it argues that both communist and postcommunist governments used the general budget as a buffer to compensate losers of economic reforms, especially microeconomic restructuring. The ever-widening circle of net benefiters of welfare provisions paid from the general budget, however, has made it simply unrealistic to implement sizeable fiscal adjustment, putting the country onto a deteriorating path of economic development.

From Cash to Electronic Payments: Microeconomic, Macroeconomic, and Policy Aspects of Retail Payment Systems

This dissertation explores three aspects of the economics and policy issues surrounding retail payments (low-value frequent payments): the microeconomic aspect, by measuring costs associated with retail payment instruments; the macroeconomic aspect, by quantifying the impact of the use of electronic rather than paper-based payment instruments on consumption and GDP; and the policy aspect, by identifying barriers that keep countries stuck with outdated payment systems, and recommending policy interventions to move forward with payments modernization. Payment system modernization has become a prominent part of the financial sector reform agenda in many advanced and developing countries. Greater use of electronic payments rather than cash and other paper-based instruments would have important economic and social benefits, including lower costs and thereby increased economic efficiency and higher incomes, while broadening access to the financial system, notably for people with moderate and low incomes. The dissertation starts with a general introduction on retail payments. Chapter 1 develops a theoretical model for measuring payments costs, and applies the model to Guyana—an emerging market in the midst of the transition from paper to electronic payments. Using primary survey data from Guyanese consumers, the results of the analysis indicate that annual costs related to the use of cash by consumers reach 2.5 percent of the country’s GDP. Switching to electronic payment instruments would provide savings amounting to 1 percent of GDP per year. Chapter 2 broadens the analysis to calculate the macroeconomic impacts of a move to electronic payments. Using a unique panel dataset of 76 countries across the 17-year span from 1998 to 2014 and a pooled OLS country fixed effects model, Chapter 2 finds that on average, use of debit and credit cards contribute USD 16.2 billion to annual global consumption, and USD 160 billion to overall annual global GDP. Chapter 3 provides an in-depth assessment of the Albanian payment cards and remittances market and recommends a set of incentives and regulations (both carrots and sticks) that would allow the country to modernize its payment system. Finally, the conclusion summarizes the lessons of the dissertation’s research and brings forward issues to be explored by future research in the retail payments area.

Democracy on the edge: limits and possibilities for the implementation of an urban reform agenda in Brazil

In Brazil the 1990s constituted years of institutional achievements in the fields of housing and urban rights, given the incorporation of the principles of the social function of cities and property, the recognition of tenure rights for slum dwellers and the direct participation of citizens in the decision making process of urban policies, within the 1988 Constitution. These proposals have become the pillars of the Urban Reform agenda which has penetrated the federal government apparatus since the creation of the Ministry of Cities under Lula's administration. The article evaluates the limits and possibilities for the implementation of this agenda through the analysis of two policies proposed by the Ministry: the National Council of Cities and the campaign for Participatory Master Plans. The approach is based on the organization of the Brazilian State in terms of urban development, the relationship with the political system and the characteristics of Brazilian democracy.

Spatial patterns of malaria in a land reform colonization project, Juruena municipality, Mato Grosso, Brazil

Background: In Brazil, 99% of malaria cases are concentrated in the Amazon, and malaria's spatial distribution is commonly associated with socio-environmental conditions on a fine landscape scale. In this study, the spatial patterns of malaria and its determinants in a rural settlement of the Brazilian agricultural reform programme called ""Vale do Amanhecer"" in the northern Mato Grosso state were analysed. Methods: In a fine-scaled, exploratory ecological study, geocoded notification forms corresponding to malaria cases from 2005 were compared with spectral indices, such as the Normalized Difference Vegetation Index (NDVI) and the third component of the Tasseled Cap Transformation (TC_3) and thematic layers, derived from the visual interpretation of multispectral TM-Landsat 5 imagery and the application of GIS distance operators. Results: Of a total of 336 malaria cases, 102 (30.36%) were caused by Plasmodium falciparum and 174 (51.79%) by Plasmodium vivax. Of all the cases, 37.6% (133 cases) were from residents of a unique road. In total, 276 cases were reported for the southern part of the settlement, where the population density is higher, with notification rates higher than 10 cases per household. The local landscape mostly consists of open areas (38.79 km(2)). Training forest occupied 27.34 km(2) and midsize vegetation 7.01 km(2). Most domiciles with more than five notified malaria cases were located near areas with high NDVI values. Most domiciles (41.78%) and malaria cases (44.94%) were concentrated in areas with intermediate values of the TC_3, a spectral index representing surface and vegetation humidity. Conclusions: Environmental factors and their alteration are associated with the occurrence and spatial distribution of malaria cases in rural settlements.

Forest Policy Reform in Brazil

Rapid deforestation in the Brazilian Amazon, caused by economic, social, and policy factors, has focused global and national attention on protecting this valuable forest resource. In response, Brazil reformed its federal forest laws in 2006, creating new regulatory, development, and incentive policy instruments and institutions. Federal forestry responsibilities are maintained within the ministry of the environment; its regulatory agency responsibilities are divided among three different branches of the agency; many powers are delegated to states and municipalities; and a new private concession system is being developed. These reforms offer promise to improve forest protection and management in Brazil but must overcome significant institutional and social resistance for success.

Democracy on the Edge: Limits and Possibilities in the Implementation of an Urban Reform Agenda in Brazil

The 1990s in Brazil were a time of institutional advances in the areas of housing and urban rights following the signing of the new constitution in 1988 that incorporated the principles of the social function of cities and property, recognition of the right to ownership of informal urban squatters and the direct participation of citizens in urban policy decision processes. These propositions are the pillars of the urban reform agenda which, since the creation of the Ministry of Cities by the Lula government, has come under the federal executive branch. This article evaluates the limitations and opportunities involved in implementing this agenda on the basis of two policies proposed by the ministry - the National Cities Council and the campaign for Participatory Master Plans - focusing the analysis on government organization in the area of urban development in its relationship with the political system and the characteristics of Brazilian democracy. Resume Au Bresil, les annees 1990 ont ete marquees par des progres institutionnels en matiere de logement et de droits urbains, dans le sillage de la Constitution de 1988 qui integre les principes d`une fonction sociale de la ville et de la propriete urbaine, ainsi que la reconnaissance du droit a la propriete pour les squatters urbains et la participation directe des citoyens aux processus d`elaboration des politiques urbaines. Ce sont egalement les piliers du programme de reforme urbaine qui releve de l`executif federal depuis la creation d`un ministere des Villes par le gouvernement Lula. Pour evaluer les limites et potentiels lies a la mise en place de ce programme, cet article s`appuie sur deux politiques publiques proposees par le ministere, le Conseil national des villes et la campagne en faveur des Plans directeurs participatifs, en analysant plus particulierement l`organisation gouvernementale en matiere d`urbanisme par rapport au systeme politique et aux caracteristiques de la democratie bresilienne.