Public finance reforms and corporate sector impact: A study of Hungary

Abstract

The global financial and economic crisis of 2007 and 2008 entailed a sharp deterioration of fiscal positions worldwide; however, fiscal rules soon tightened up in different countries, and parallelly, budgetary discipline improved. A reconsideration of the fiscal policy was necessary as a sovereign debt crisis evolved as a result of the world economic crisis in several countries of the European Union and the eurozone. The study starts at the government debt map of the old member states of the European Union, to which the Hungarian financial positions outside the eurozone are compared. Then, the components of the new Hungarian public finance regulation, major measures, which resulted in an improvement in line with eurozone positions, are presented in full detail. Our study seeks to prove that because of the Hungarian public finance reforms, the fiscal course has also improved, fitting the trends of developed member states of the EU. Although earlier researches have highlighted that it was not only modified fiscal policies that contributed to the post-crisis debt consolidation process in the countries of the eurozone but also the combined effect of the real interest rate and real growth policy. The uniqueness of the study lies in the regulatory instruments, with which the country – positioned in a socialist planned economy, then demonstrating a weak fiscal discipline and sunk in a fiscal crisis even before the global economic crisis of 2007 and 2008 – has consolidated its positions.