Gábor Kovács

The drastic increase in volume of local government debt in Hungary started in 2006. From that year to 2009 the value of municipal bonds issued increased sevenfold and exceeded USD 1 billion. My hypothesis assumes that a supposable improvement in local municipal financial management may have resulted in the spread of bond issue, which in Hungary is still considered innovative.
My research, which was based on a stratified sample of 308 Hungarian municipalities, came to the conclusion that expertise of local governments’ financial executives related to loan financing (including also bond financing) is extremely low. As an interval estimation, we can conclude that practically 31–39% of all the Hungarian municipalities have no professional knowledge in this field. Based on my survey, the least right answers were given to statements relating to bond financing itself, though most respondents knew that long term borrowing’s priority is investment. The majority of local governments are unable to distinguish the economic differences between bank loans and bonds, and are unclear concerning the potential benefits, advantages, and disadvantages of bonds. No wonder that nearly all the bonds were issued privately where the buyers were solely commercial banks. In addition, 12–18% of the municipalities has prejudices and clearly has misconceptions about obtaining funds through borrowing.
According to the results of principal component analysis local governments’ knowledge level can be classified and explained by three components: theoretical knowledge of local borrowing, knowledge of legal and administrative regulation, and skill in capital market financing. By summing up the results of the research it can be stated that the improvement in local financial management couldn’t have been the primary reason for municipal bond boom, but there were external factors that determined and dominated this process of booming.

Universities face increasing competition and depend more and more on political, economic, but also environmental factors. These lead to new turbulences for higher education organisations. Essentially, higher education systems become constantly more complex, reliant and fast changing, the level of disruption that confronts university leaders increases. In this context, innovation management is a central device to deal with foreseen and unforeseen disruption. The paper describes how innovation audit can be applied as a major means of change and innovation management to increase the competitiveness and innovation capacity of higher education institutions. The topic is presented from two aspects that later meet each other, from the aspect of higher education institutions and that of innovation management.
 

Hungary has a unitary government system with 19 counties, 23 “cities with county rank” and about 3200 local (municipal) governments. The financial architectureof local governments is quite complicated and budget constraints are “halfway” between soft and hard. After an early and temporary “municipal bond boom” in the middle of 1990’s, the size of indebtedness started to increase considerably, first in 2002. By the end of 2011 the size of financial obligations deriving from local borrowing amounted more than 4.7% of GDP.

The paper is aimed at examining factors that might have been behind indebtedness and tries to separate the effect of internal and external variables for the period between 1990 and 2011. According to the results of the empirical analysis local authorities’ borrowing activity cannot be explained only with help of quantitative macro-economical indicators such as total sub-national revenues, expenditures, CPI and GDP.Namely, the formation of debt was mainly determined by behaviour patterns of local governments and byrandom (unforeseeable) shocks caused by changes in central regulation. The short term patterns in borrowing attitude are due to the four-year long election cycle of local representatives while adapting to random shock happens quickly within one year. Four different time-phases (periods) can be determined, which can be described by different characteristics and makes explanation for the formation of local debt: Early development of subnational debt markets (1990-1995); restriction (1996-1997); moderate growth (1998-2006); municipal bond-boom (2007-2010).

The paper aims to describe how the amount of retail customers’ bank deposits has changed as a result of launching the financial transaction tax in Hungary. The liquidity premium related to all bank deposits offered by Hungarian banks will be analysed and its amount will be calculated from the transfer costs on the supply side. The objective of the research is to measure liquidity premium at sector level. When analysing the liquidity premium, both the size of the invested amount and duration of the deposit are tackled. Since the size of liquidity premium may considerably affect competition on the market, the paper tries to model this relationship and estimate the value of the corresponding parameters.

This paper was written in the framework of ‘EFOP-3.6.1-16-2016-00017’project.