The Public Finance Quarterly deals mainly with the issues of public finances, is published quarterly under the administration of the Corvinus University of Budapest as editor, it includes in a single volume the Hungarian and English versions of the published writings, has more than fifty year tradition, an up-to-date typographic design, a permanent structure of topics for the published writings and has undergone a major renewal resulting in an enrichment of its' contents.
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From the Psychology of Decisions to Economic Models
Kovács Kármen: Viselkedési közgazdaságtan. (Behavioral Economics) (Akadémiai Kiadó, 2025. ISBN: 9789634549826.)
Copyright (c) 2026 Public Finance Quarterly https://creativecommons.org/licenses/by/4.0
Can Our Financial System Be Made Cheaper and Less Risky? Report on the 8th Budapest Public Finance Seminar
On May 13, 2026, in partnership with the Konrad Adenauer Stiftung, the National University of Public Service (NKE) together with the Hungarian Economic Association (MKT) organized the 8th Budapest Public Finance Seminar. In addition to other recent developments in monetary theory, the conference’s main theme was sovereign money. The topic’s relevance stems from the fact that the past decade has redefined the economic policy possibilities offered by central bank money from both technological and monetary theory perspectives, especially with regard to the potential inherent in a central bank digital currency (CBDC). At the same time, we have repeatedly experienced financial crises based on credit money, raising the question of how we might move toward operating a monetary system with lower risk and lower interest costs. The English-language international conference, chaired by Gábor Kutasi (Research Institute of Competitiveness and Economics), explored these issues with the help of invited speakers from the United States, Germany, the United Kingdom, the Czech Republic, and Hungary. The issues were examined from the perspectives of fintech, Modern Monetary Theory (MMT), and banking and economic policy.
„Europe needs to organise its own defence more effectively” – A conversation with Péter Ákos Bod on domestic and global uncertainties
Exploring cognitive patterns in credit default risk management
The significance of the chosen research topic arises from the growing complexity of economic exchanges, stricter requirements for banking supervision, and the increasing necessity to enhance risk management. In the context of global financial uncertainty and the accelerated flow of information, traditional methods of assessing banking risk may no longer be adequate. This study explores innovative frameworks capable of autonomously processing large datasets, predicting potential hazards, and providing effective mitigation strategies. The research is grounded in general scientific methods such as analysis, synthesis, classification, and bibliographic review. The findings suggest that incorporating cognitive models into banking risk management signifies a shift from traditional practices toward more adaptive and predictive approaches. Although these models show considerable potential for improving banking risk practices, they remain underutilized in the financial sector. The cognitive framework proposed in this study may significantly enhance decision-making efficiency and reduce liabilities, offering practical value, particularly in dynamic market conditions.
The 2026 parliamentary elections in Hungary may offer a new opportunity to restore the distorted functional structure and disrupted equilibrium of our economy and social trust, to eliminate corruption, and to carry out comprehensive reforms of economic policy and public finances - reforms made inevitable by the record-high public deficit, the significantly increased national debt and interest burden, the low productivity and GDP growth coupled with wage increases that outpace these figures, the lack of EU funding, the unpredictable government interventions that preclude free market competition, the low quality of education, healthcare, and the railway network, and the failure to diversify energy sources.
Redistribution Meets High Education Investment: Designing Taxes and Subsidies for Social Welfare
While some papers address optimal taxation in the context of educational investment, the literature falls short in characterizing the optimal joint design of government higher education subsidies and income tax rates that simultaneously promotes redistribution and incentives for human capital accumulation. The model is solved analytically under general conditions and calibrated to assess its quantitative implications for efficiency, inequality, and welfare. Simulations show that incorporating education investment substantially alters the optimal level of income tax progressivity, with the effect depending on the responsiveness of human capital accumulation to after-tax returns. For an inequality-averse social planner, rising marginal tax rates generally emerge as optimal; yet, generous education subsidies—similar to those in several OECD countries—can justify decreasing marginal tax rates for high-income earners.
What Does the Balance Sheet (Not) Show? Asset Valuation in the Hungarian Accounting System
In interpreting corporate financial statements, the balance sheet total is often treated as a direct measure of a firm’s wealth. However, continental accounting systems, including Hungarian accounting regulation, are grounded primarily in accrual accounting, realization, and capital protection. This study examines which firm-level factors are associated with the use of asset revaluation in the Hungarian corporate sector. The empirical analysis is based on the CrefoPort database for 2020-2024 and comprises 811,998 firm-year observations for 164,712 companies. The relationships are analyzed using a logistic regression model. The results show that revaluation is associated mainly with asset structure and firm size, while a significant relationship is also observed with the firm’s capital protection position. The analysis provides large-sample empirical evidence that, in the Hungarian accounting environment, asset revaluation does not function as a general technique for approximating corporate wealth.
The Monetary Transmission Effects of Central Bank Digital Currency (CBDC) in Hungary: A Simplified DSGE Simulation
The paper examines how the introduction of a moderate, interest-neutral (policy-rate-remunerated) central bank digital currency (CBDC) modifies the short-run transmission of monetary policy in Hungary’s 2025 macroeconomic environment. It extends a baseline New Keynesian DSGE model with a CBDC, in which household savings are split between deposits and CBDC while bank lending is tied to deposits, so deposit substitution can weaken intermediation. Following calibration, simulations and impulse responses suggest that rule-based stabilisation largely remains intact, but the responses of real variables are more muted and adjustment may be slower.
dynamic stochastic general equilibrium model
Government responses to housing challenges – Foreign currency loans vs. CSOK and Home Start Programme
In recent decades, the housing crisis has been present in Hungary to varying extent. The paper aims to prove that passive governmental measures (allowing the spread of foreign currency lending) are far from achieving the same results in the field of housing as active and comprehensive packages of governmental measures (CSOK, Otthon Start Program), which have demographic goals in addition to housing policy. Besides classic literature sources, the paper also relies on law, relevant KINCS researches, as well as various banking/real estate market reports and analyses. The experience arising from foreign currency lending and the change in family and housing policy after 2010 shows that the housing crisis can only be managed by active measures, while passive measures can only achieve results for a short period of time, with significant systemic risks, which in turn can very easily be reversed by an economic crisis or other force majeure event, thus catalyzing the housing crisis.
SME Investment in Hungary: Financing Conditions, Development Needs, and Structural Misalignment
This study aims to identify the factors that explain the limited implementation of intangible and digital investments among Hungarian small and medium-sized enterprises (SMEs). The dominant explanation attributes investment restraint primarily to financing constraints; however, recent evidence suggests a more nuanced picture. Scientific and practical relevance: The paper introduces a conceptual framework – the financing alignment problem – contributing to the renewal of SME finance literature and offering direct policy implications. The analysis is based on multi-stakeholder expert discussions, qualitative interviews, and systematic review of secondary sources. The findings indicate that investment restraint is not primarily driven by a lack of access to finance, but by the limited alignment between intangible investments and the prevailing logic of financial intermediation. Stimulating SME investment requires a better fit between financing instruments and firm-level development needs.
Distortions in the Functional Structure of the Economy (A Retrospective View of the Recent Past)
The study seeks an explanation for the years of stagnation of the Hungarian economy, and the question of what mechanisms, consistency disorders, and behavioral patterns led to the “engine of the economy” choking. On the one hand, our economy differs from the economic policy principles and practices of the countries of the region. Government intervention is common in making many economic decisions, a high degree of centralization of resources and decision-making powers, special taxation of certain sectors without rational explanation, government favoritism of certain corporate groups, their withdrawal from the scope of market control, a high degree of lack of responsibility in the decision-making and management system, and the unaccountability of the most obvious economic crimes. On the other hand, the stagnation is due to economic governance errors, persistent laxity and lack of discipline in budget management, frequent changes to the budget within a year, chronic deficits exceeding the planned ones, and the continuous indebtedness of the state.
Aging: New Challenges for the Economy and Society
Demographic trends are characteristics of paramount importance to any economy and society. The age structure of the population in developed and moderately developed countries is changing dramatically. Older people are increasingly making up a growing proportion of the population. This trend, which has extremely wide-ranging implications, is known as aging.
The first 2026 issue of the 72-year-old Financial Review (Pénzügyi Szemle) once again offers a wide range of exciting and topical subjects for its readers. We explore knowledge-driven competitiveness, the root causes and varying perceptions of corruption, the complexities of globalization and inflation, the Algerian tax system, and the impact of ESG reporting on financial markets. Intellectual or human capital (the knowledge, competence, expertise, skills, experience, ideas, loyalty, faithfulness, motivation, cooperation of the workforce), organizational capital (business processes, supply chains, product distribution and IT systems, institutional structures, big data, networks, geographical location, synergies), relationship capital (with customers, suppliers, government, long-term contracts, customer lists, reputation, image, corporate culture, website, branding, theories), and innovation capital (market launch of a new or significantly modified product or service, new process, marketing procedures) play an increasingly important role in the performance of business enterprises.
A shield and a compass between two worlds – where financial rationality meets the threats of cyberspace
Elemér Terták and Levente Kovács: Cybersecurity – Cyberspace
Interview with Dr Erzsébet Nováky, Professor Emerita
Muted market reactions: the impact of esg announcements on stock returns and risk in the energy sector
This study investigates short-term financial market reactions to specific Environmental, Social, and Governance (ESG) announcements by energy sector companies. The central research question is whether positive and negative ESG events have a significant impact on companies’ cumulative abnormal stock returns (CARs) and market sensitivity (beta). The scientific relevance of the topic stems from the fact that most prior research has analysed the long-term effects of aggregate ESG scores, leaving the immediate market processing of discrete public announcements less explored. Its practical importance is driven by the energy industry’s sustainability transition and the growing prominence of ESG-focused investing. The research employs an event study methodology on 20 ESG events from ten traditional and renewable energy companies between 2020 and 2025, using OLS regression. The key findings indicate that the selected ESG announcements generally did not elicit statistically significant market reactions in terms of either returns or risk metrics. Initial significant results were not robust to changes in the market benchmark, suggesting nuanced, methodology-sensitive information processing by the market.
Financial Development Factors Influencing Corruption Perceptions in European Union Countries
Objective: Identify the factors that shape perceptions of corruption in European Union countries, with particular attention to financial inclusion and press freedom. Design/Methodology/Approach: Quantitative analysis was conducted using data from 27 EU member states, splitting the data into those that joined before and after 2004. In the regression models, financial inclusion indicators-digital transactions and online banking-along with press freedom indices, were checked against perception regarding corruption. Results: These findings imply that while financial inclusion, for example, through digital banking services, decreases perceived corruption, its impact is rather moderate compared to other structural factors, such as press freedom. The higher the level of press freedom, the greater the levels of societal transparency and accountability, leading to lower perceptions of corruption. Research Implications: The study underscores the need for structural reforms that promote institutional transparency and the media’s independence. Financial technologies can only supplement robust governance frameworks and boost efforts to fight against corruption. Originality/Value: This paper compares the factors that determine corruption within the European Union, integrating financial innovation and institutional transparency. The outcomes provide the policy-making sphere with realistic recommendations for implementing concrete anti-corruption measures.
A successful path of growth and development amid changing competitive conditions is built on intellectual capital
The hectic and increasingly unpredictable changes of our time are forcing both nations and companies to rethink their development paths. This is compounded by resource depletion and the need to increase the efficiency of their use. Quantitative growth targets are also being superseded by the need to shift toward a systems-based approach to development, as well as by the new opportunities this shift offers. The importance of intellectual content, organizational, and leadership capabilities–already recognized and referred to by various names–comes to the fore in improving competitiveness, successfully adapting to change, and generally ensuring preparedness for the future. The article outlines the main professional arguments regarding the role of intellectual assets in competitiveness. Then, based on the data, it demonstrates that investments in intellectual assets contribute to improved socio-economic performance and competitiveness at both the national and corporate levels. The article clarifies concepts related to intellectual content and also addresses measurement issues.
Trends in Trade Openness and Inflation Volatility Across European Countries
This research quantitatively examines the relationship between globalisation and financial instability, focusing on two variables: trade openness relative to GDP and inflation volatility (proxied by annual CPI changes) across six developed and developing European countries between 2013 and 2023. This research shows the empirical relationship between trade openness and inflation stability, without accounting for other drivers such as monetary policy or capital flows. It examines the questionable relationship between globalisation and financial instability across the selected economies, offering insights into their differing vulnerabilities. Based on secondary data collected from reliable sources, we conducted Pearson correlation, regression, and trend analyses to establish these dynamics. Primary results reveal a stronger positive relationship between trade openness and inflation fluctuations in developed countries, particularly France and Germany, than in developing countries, including Hungary and Romania, which experienced more synchronised trends. These findings provide descriptive evidence of country-level differences in the relationship between trade openness and inflation volatility. They serve as a basis for further research rather than for drawing strong policy conclusions.
The Future of Sustainability Education: A Multidisciplinary, Student- Centered Approach
This review examines a groundbreaking educational guide, the Sustainable Economics Teacher’s Manual designed to integrate sustainability into higher education curricula across diverse disciplines. The book presents an interdisciplinary framework spanning economics, law, engineering, medicine, arts, and social sciences, emphasizing sustainability as a unifying lens rather than a standalone subject. Structured into 14 thematic units, the content combines theoretical knowledge with practical, student-centered activities. It promotes interactive learning through case studies, debates, and simulations while integrating multimedia resources. The book aligns with emerging educational trends like blended learning, flipped classrooms, and gamification. This book offers a forward-thinking blueprint for sustainability education, preparing students to become proactive agents of change in a rapidly evolving global landscape.
Copyright (c) 2025 Public Finance Quarterly https://creativecommons.org/licenses/by/4.0
Central Bank Digital Currency (CBDC) or stablecoins, or both – A central banking perspective
With the above title, the Monetary Policy Section of the Hungarian Economic Association (MKT) organised an English-language webinar on Wednesday, November 5, 2025. Panellists included fellow workers from the Bank for International Settlements (BIS), Decent Investments, Hold Asset Management, and the National Bank of Hungary. The audience had the opportunity to intervene. The event was organised under the “Chatham House Rule”.1 This article provides an overview of the issues discussed at the session, as interpreted by the author. It therefore does not necessarily reflect the views of individual speakers, their institutions, or the industry as a whole.
First experiences with the global minimum tax and the difficulties of determining tax residency: key takeaways from the IFA’s 77th Congress in Lisbon in 2025
The International Fiscal Association (IFA) was founded in the Netherlands in 1938 with the aim of promoting the development of international and comparative tax law and public finance. The organization is unique in that its members include an equal proportion of experts from the public and private sectors, including tax authority leaders, ministry decision-makers, scientists, lawyers, consultants, and corporate tax directors. Headquartered in Rotterdam, it currently has more than 70 national branches and approximately 14,000 members. The IFA’s annual World Congress is the most important forum for international taxation, where theoretical research and practical experience converge. The 77th Congress, held in Lisbon in 2025, was particularly significant because 2024 marked the first year of implementation of the global minimum tax (Pillar II) in the European Union. Key topics included redefining corporate residency in the digital age and combating the misuse of double taxation agreements. Representatives from the OECD, the European Commission, the IMF, the World Bank Group, IOTA, CIAT, and ICC, and the presentations and seminars provided a comprehensive overview of the rapidly changing international taxation system, the balance between legal certainty and competitiveness, and the directions for developing a modern, transparent, and coherent tax policy.
Slovakia’s stagnation in catching up with more developed economies: macroeconomic and regional dimensions
In the aftermath of the global financial crisis in 2009, a number of Central and Eastern European economies, including the Visegrad four, experienced a phase of slowing real convergence. Their ability to catch up with the performance of more advanced European economies has declined to varying degrees and for varying lengths of time. The Slovak economy is a special case, which has been particularly hard hit by the problem of slowing real convergence. This paper shows the specific features of the Slovak case in both the macroeconomic and regional dimensions. It also explains the range of causes of this phenomenon. These are primarily related to the underdevelopment of new drivers of productivity: the parameters of capital accumulation have deteriorated, investment in intellectual property assets, the parameters of hi-tech activities and research and development have lagged far behind. In the regional perspective, the slowdown at macro-level convergence has mainly been reflected in the deterioration of the position of the strongest regions, and thus the performance of Slovakia’s regions has paradoxically moved closer together. The analysis is in the nature of an explanatory case study that explains the peculiar trajectory of Slovakia and the deterioration of its position in the V4 group. In doing so, it analyses primarily data from national accounts and regional accounts.
A significant part of the world would like to get rid of dollar-based international settlements and is therefore looking for non-dollar alternatives. It is replacing dollar settlements with clearing systems. This is resulting in a spectacular division in international payment systems. Another division is the role of digital currencies. Technological advances have enabled the operation of high-capacity computers. This has made it possible to create digital national currencies. This is how cryptocurrencies and digital national currencies came into being. Cryptocurrencies embody legal value and are created using special distributed ledger technology. Their creation is called cryptocurrency mining. Anyone who is technically capable can do it. National currencies are monopolies; only the central bank and the banking system can create them. Accepting cryptocurrencies in the payment system is risky because their value is volatile. Stablecoins are pegged to the dollar, so their value is presumably stable. This is based on trust. US President Trump wants to base the future on these currencies produced by tech giants. In contrast, China was the first to create its digital national currency, the digital yuan. This process also divides the international settlement system. The EU is considering combining the two methods. There will be a digital euro, but there will also be stablecoins – albeit regulated ones. (China also allows yuanbased stablecoins.)
authorisation and regulation of stablecoins
Integrity, Education, and Moral Renewal – International Insights and Lessons for Hungary
The scandal that broke out in Brazil in 2014 came to be known in the media as “Lava Jato” – or “Car Wash”. What began as a money laundering case centred around a small car wash quickly escalated into one of the largest corruption scandals on the continent. The investigation uncovered a multi-billion-dollar bribery network that had been operating for decades around Petrobras, a state-owned oil company. Politicians, state officials, as well as multinational companies and criminal networks were all involved. The mechanism was deceptively simple – yet devastating: large corporations were awarded overpriced contracts by the state-owned oil company, with part of the surplus ending up in the pockets of political parties and decision-makers. The machinery of corruption served not only to enrich certain individuals, but also to finance the maintenance of the entire political system. The consequences were staggering: Petrobras’s share price collapsed, tens of thousands of jobs were lost, and Brazil’s economy plunged into a deep recession. Ministers, members of government, party leaders and executives from the largest construction company were all imprisoned, and even Luiz Inácio Lula da Silva, the country’s iconic former president, stood trial. The social fabric of the country was shaken, as millions of people took to the streets, having lost their trust in the political and economic elite. Yet the true tragedy of the Lava Jato scandal went far beyond financial loss or the exposure of the political elite, as the people of Brazil came to realise that corruption is not the sin of a few “black sheep”, but a systemic driving force that permeates everything. The erosion of trust has left a lasting wound on society that will affect generations to come. One of the most shocking revelations of this scandal was the sheer scale of the bribes involved. Investigators found that construction companies had inflated project costs by up to 20%, not only funnelling billions of dollars into secret political funds, but also showering politicians and corporate executives with luxury beachfront apartments in Rio, yachts, Rolex watches, and suitcases full of cash. The blend of multi-billion-dollar contracts and extravagant personal gifts turned the scandal into a symbol of how systemic corruption can simultaneously rot institutions and corrode personal integrity – all while affording a life of luxury to a select few.
Unfortunately, in 2025 as well, reports have appeared repeatedly in both the domestic and international press about abuses involving public funds, embezzlement, corruption, bribery, public procurement fraud, conflicts of interest, and, nota bene, the concealment of public debt. Public assets can only be misused for private gain in an irregular manner where and when the use of public funds is non-transparent and chaotic, where internal controls are absent or malfunctioning, where the protection of public assets is inadequate, and where accountability mechanisms are insufficient. The continuous fight against violations of the law can only be successful if authorities act with sufficient rigor both domestically (see our first study) and internationally (see our second and third studies), that is, if they take a global approach against those who violate competition rules.
Report on the International Management Teachers Academy (IMTA) held in Bled, June 15–21, 2025
Between June 15–21, 2025, the renowned IMTA (International Management Teachers Academy) program took place in Bled, Slovenia, organized by CEEMAN (Central and East European Management Development Association). The program’s objective was to prepare participants for the application of modern, student-centered, and experience-based teaching methods, with particular emphasis on case study–based instruction, which plays a deﬁning role in international business and management education.
Interview with Dr. Éva Palócz, CEO of Kopint-Tárki
Preliminary decision-making procedures in financial law matters in countries that joined in 2004
The aim of this study is to show the proportion of cases in which the courts of the countries that joined the European Union in 2004 (Cyprus, the Czech Republic, Estonia, Poland, Latvia, Lithuania, Hungary, Malta, Slovakia, and Slovenia) have referred ﬁnancial law issues to the Court of Justice of the European Union for preliminary rulings, and the types of cases in which they have sought guidance. In the introduction, I discuss whether there is such a thing as a European tax, and then I go on to discuss the importance of the case law developed by the Court of Justice of the European Union in the ﬁeld of ﬁnancial law. The research method is based on a statistical analysis of search results using keywords speciﬁed on the website https://curia.europa.eu. I ﬁltered the available data and information based on requests for advance rulings on customs cooperation, customs valuation, common customs tariﬀ, customs union, indirect taxation, excise duties, value added tax, internal taxation, and taxation. As a result, I used a ratio to compare the data and grouped the motions into diﬀerent categories. If a case is interesting or noteworthy from any point of view, or if it has an impact on the practice of tax authorities or courts, I highlight the facts of the case or its theoretical signiﬁcance. I then summarized my general and substantive legal conclusions, from which I drew my ﬁnal conclusion.