Template-Type: ReDIF-Article 1.0

Author-Name: Gergely Kicsák
Author-Workplace-Name: Magyar Nemzeti Bank (Central Bank of Hungary)
Author-Email: kicsakg@mnb.hu


Title: Developments in Government Interest
Expenditure for Hungary, 2000–2015

Abstract: In this study, we examine the changes in interest expenditure between 2000 and
2015, and in this context, focus particularly on analysing the impact of decreasing
yields on the government securities market observed over the past three years.
The annual change in interest expenditure can be categorised into several factors
based on a methodology similar to the decomposition of government debt, and the
summary discloses the details of the trends characterising the four periods which
can be distinguished over the past 15 years. From among these factors, we gave
precedence to the analysis of the changes in yields as this factor exerts a stronger
influence on the developments in interest expenditure than any other factor. Based
on a regional comparison, in addition to a supportive international environment,
domestic factors have also strongly affected the favourable developments of the
government securities market in recent years. From the Hungarian developments,
we should highlight the fact that interest rate cuts together with the Self-financing
Programme, which mitigated Hungary’s external vulnerability, has had a tangible
impact on the developments in Hungarian government securities’ yields, and as
such, due to the substantial contraction in interest expenditure, exerted a favourable
effect on the balance of the general government. Finally, we also present the
imputed interest expenditure entailed by the reorganisation of the pension system,
and the study argues that these should be managed separately from actual interest
expenditure.

Classification-JEL: E42, H50, H62, H63
Keywords: general government, interest expenditure, monetary policy
Pages: 46–73
Volume: 16
Issue: 1
Year: 2017
File-URL: http://english.hitelintezetiszemle.hu/letoltes/gergely-kicsak.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:16:y:2017:i:1:p:46-73