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The entire list of my Hungarian language publication can be downloaded from the Hungarian language site.

Erhart, Sz.– Vasquez-Paz,J.,L.: Optimal Monetary Committee Policy Size MNB Working Papers, 2007/6

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Theoretical and empirical studies of different sciences suggest that an optimal committee consists of roughly 5-9 members, although it can swell mildly under specific circumstances. This paper develops a conceptual model in order to analyze the issue in case of monetary policy formulation. The optimal monetary policy committee (MPC) size varies according to the uncertainty of MPC members’ information influenced by the size of the monetary zone and overall economic stability. Our conceptual model is backed up with econometric evidence using a 2006 survey of 85 countries. The survey is available for further research and published on the authors’website. The MPC size of large monetary zones (EMU, USA, Japan) is close to the estimated optimal level, but there exist several smaller countries with too many or too few MPC members.
This is an example for an imageDownload the survey data in excel charts.

Erhart, Sz.: Motorist Conquest in BudapestActa Oeconomica, 2/2009

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Economic growth requires well functioning transport systems. The paper deals with the problems associated with ever-increasing car use and traffic jams in Budapest. Car scarcity was the major problem that impeded car use two decades ago which has transformed into road scarcity since then. Road capacity is limited in the Hungarian capital, only the public transport can help to satisfy medium run travel demand of residents. As motorization and car use grow congestion related time loss, petrol and pollution costs put a heavy burden on Budapest. International experience shows that restrictions on cars can mitigate congestion. In many large cities introduction of road pricing in central areas has become one of the most successful traffic management solutions. Experience in London and Stockholm confirms that citizens support car use restrictions even if they are placed on car use. This is an example for an imageDownload chartbook of the study and the data in excel format.

Erhart, Sz.:Driving factors behind O/N interbank interest rates – the Hungarian experiencesMNB Occasional Papers 34., 2004.

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This study examines overnight (O/N) interest rates which constitute the short end of the yield curve and the factors which have an impact on such rates. The MNB, unlike several other central banks, does not have a direct overnight interest rate target; it does, however, limit the divergence of O/N interest rates from its policy rate with the settings of its operational framework. First, the MNB’s regulations on compulsory reserves allow banks to apply averaging in the reserve maintenance period, which reduces overnight interest rate volatility. Second, the interest rate corridor – determined by MNB’s collateralised loan and deposit – limits the maximum fluctuation band of overnight interbank interest rates. The study finds that the role of reserve averaging to reduce yield fluctuations is imperfect, as a clear seasonal pattern is observed in the intra-maintenance period evolution of overnight rates. The frequency of cumulative front-loading and excess reserves is significantly higher than the frequency of reserve deficit. Therefore, the level of overnight interest rates tends to remain below the policy rate and drop towards the interest rates of overnight central bank deposits at the end of the maintenance period. Moreover, statistical analysis finds evidence that the impact of liquidity withdrawing shocks are typically greater – approximately twice as much – as of those injecting liquidity. This phenomenon could be explained by the volatility of autonomous liquidity factors, especially that of the government accounts, which is particularly high on VAT payment days. Institutional settings (credit limits, limitation of maximum deviation from reserve requirements, high interbank concentration) curtail the potential of the interbank market to efficiently distribute liquidity over the entire system, which may also explain the asymmetric liquidity management characteristics of Hungarian banks.

Csávás, Cs. - Erhart, Sz.: Are Hungarian financial markets liquid enough?MNB Occasional Papers 44., 2005.

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Adequate liquidity of markets is of great significance from the point of view of both market participants and the central bank. On the one hand, of all market segments an examination was made of the domestic forint-euro spot FX market, which is of key importance due to the openness of the country’s economy. On the other hand, an analysis was made of the market of forint denominated government bonds, which plays a crucial role in the transmission of the central bank’s interest rate policy. Several useful lessons can be drawn from looking over the literature dealing with the measurement of market liquidity. First, liquidity can unambiguously be interpreted only alongside several liquidity dimensions. The so-called tightness dimension of liquidity can be measured by the transaction costs, a typical indicator of which is the bid-ask spread. Another important dimension is market depth, and market turnover is most often used in literature as its approximation indicator. Accordingly, in the course of empirical examinations, the two main liquidity indicators, i.e. the bid-ask spread and turnover were examined not only separately, but also in terms of their relationship. Another important conclusion to be drawn is that individual liquidity indicators may often signal changes in different directions of market liquidity, and this is one of the reasons why it is important to look at individual indicators together.

Barabás et al: Coping with the speculative attack against the forint's bandMNB Background Studies, 3/2003

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2On 15 and 16 January 2003, an intensive speculative attack was launched against the exchange rate band of the forint. This study analyses the monetary policy decisions with regard to the antecedents of the speculation, the events of the speculative episode and the subsequent period of consolidation. The study finds that the speculative attack was irrational and unjustified in view of several considerations. Through adjustments in the policy rate and the modification of monetary instruments, the MNB was able to defend the exchange rate band of the forint. The MNB successfully localized the effects of the speculative attack on the interbank market. The MNB’s presence on the foreign exchange market facilitated the rapid and controlled withdrawal of the speculative capital, without threatening the disinflation process and the stability of the financial system. The investors taking part in the speculation incurred substantial losses, while the market developments after the speculative episode increased the banking system’s profit.


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