Funding Hungary: Exposing Normal and Dysfunctional Crisis Management

Piroska, Dóra (2017) Funding Hungary: Exposing Normal and Dysfunctional Crisis Management. Working Paper. Corvinus University of Budapest Faculty of Economics, Budapest.

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This paper contrasts the approaches of the International Monetary Fund, the European Commission and the European Central Bank to the management of the Hungarian financial crisis of 2008. It exposes normal behaviour of the IMF and the EU Commission and dysfunction on the part of the ECB, during the first liquidity trap phase of the global financial crisis. The methodology applied contrasts the IOs’ mandate with their framing of the Hungarian crisis as well as with their actual policy recommendations. It uncovers that the IMF negotiating team had a market focus, stressed the European and regional dimensions of the Hungarian crisis, and recommended large financial assistance. The Commission’s Directorate-General for Economic and Financial Affairs representatives focused on the budgetary imbalances and treated the crisis primarily as a Hungarian crisis, which has the potential of contaminating the whole EU. They provided moderate financial assistance. Finally, the ECB thought to combat contagion to the Eurozone by ignoring the European dimension of the Hungarian case. It was reluctant to provide significant assistance to an EU member state, whose banking sector is dominated by Eurozone banks. It concludes with a note on the possible negative consequences of the ECB’s action on the European Union’s integration.

Item Type:Monograph (Working Paper)
Series Name:Corvinus Economics Working Papers - CEWP
Series Number / Identification Number:2017/01
Uncontrolled Keywords:Hungary, International Monetary Fund, European Union, European Central Bank, international organisation, global financial crisis, institutional dysfunction
JEL classification:E58 - Central Banks and Their Policies
F34 - International Lending and Debt Problems
F53 - International Agreements and Observance; International Organizations
G01 - Financial Crises
H63 - National Debt; Debt Management; Sovereign Debt
Divisions:Faculty of Economics > Department of Economic Policy
Subjects:Economic policy
International relations
ID Code:2645
Deposited By: Ádám Hoffmann
Deposited On:07 Feb 2017 11:34
Last Modified:07 Feb 2017 11:34

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