Paper on the loan performance of foreign currency borrower firms

The paper Why do firms default on their foreign currency loans? The case of Hungary by Dzsamila Vonnák is about to be published in the Journal of International Money and Finance.

The paper isolates the effect of the choice of foreign currency on the loan performance of firms borrowing in different currencies in crisis times. The author uses a novel micro-level dataset from Hungary to decompose the factors contributing to the worse loan performance of foreign currency borrowers compared to local currency debtors. She finds that foreign currency denomination can worsen loan performance considerably, while selection also contributes significantly to the default differences. On the one hand, per se less creditworthy firms borrowed in foreign currency and during the crisis the foreign currency shocks further weakened their loan performances. On the other hand, more creditworthy firms that were also well-prepared for the currency risks also borrowed in foreign currency. My results suggest that not the institution of foreign currency lending per se that should be blamed for the bad loan performance of foreign currency borrowers, instead one should consider the characteristics of the borrowers.

Balázs Reizer’s presentation at the Annual Meeting of SOLE

On the 3rd and 4th May 2018, the Twenty-Third Annual Meeting of the Society of Labor Economists (SOLE) was held in Toronto, Canada, in which Balázs Reizer from our research group also participated.
The Society’s goal is to promote the study of labor economics and to make more significant the contribution of labor economics and labor economists. SOLE holds one general meeting per year, attended by members, at which members’ papers will be presented and discussed.
At this year’s Annual Meeting, Balázs gave a presentation on his research into the relationship of flexible wages, employment and efficiency.

The presentation slides can be downloaded from here.

New VoxEU column on internationalisation modes

A column from Gábor Békés and Balázs Muraközy has been published on This article is the outline of the researchers’ recent paper The ladder of internationalization modes: Evidence from European firms, forthcoming in Review of World Economics.

Globalisation has provided firms with many ways to serve their foreign customers and this column suggests that the set of internationalisation modes can be described as a ladder, with the higher rungs associated with higher levels of productivity and innovation. This ladder has three main steps – indirect exports, direct exports and outsourcing, and service and manufacturing foreign direct investment – and may provide an important source of flexibility for managers to adapt to policy shocks.

VSVK researchers’ paper in the Hungarian Country Report 2018

The new Country Reports of the European Commission for 2018 has been released in the last week. In the report about Hungary, one of the boxes is based on the draft report of Balázs Muraközy, Márta Bisztray and Balázs Reizer named “Productivity differences in Hungary and Mechanisms of TFP-growth Slowdown”.
In the box, the effects of interfirm productivity differences and the duality of the economy on the slow aggregate productivity growth in Hungary over the last decade is explained. According to Muraközy et al., large and persistent within-industry productivity differences can explain low aggregate productivity growth via two channels. First, this pattern may imply that low-productivity firms are not upgrading their technology to catch up with their more productive peers. This is certainly a possibility in Hungary, where the share of innovative SMEs is one of the lowest in the EU (see section 3.5). Second, persistent differences may also imply that the economic environment does not facilitate the reallocation of resources to more efficient firms.
Therefore, based on the paper, the importance of within-industry productivity heterogeneity suggests that policies supporting productivity growth and reallocation within sectors can be more effective than policies aiming at inter-industry reallocation.

The European Commission’s Country Reports for 2018 are available here.

Presentation on innovation and within-firm wage heterogeneity

On 22nd and 23rd February, a workshop named “Technological progress and the labour market” was held in Nuremberg, where Balázs Reizer was also one of the presenters. The purpose of the two-day workshop hosted by the Institute for Employment Research (IAB) was to bring together researchers to present their work on the labour-market effects of technological progress. Balázs presented his research with Attila Lindner and Balázs Muraközy about the relationshp between innovation and within-firm wage heterogeneity.

The presentation slides can be downloaded from here.

Paper on markups of exporters and importers in Hungary

The paper Markups of Exporters and Importers: Evidence from Hungary by Cecília Hornok and Balázs Muraközy was recently published in the journal Scandinavian Journal of Economics.

This paper studies the relationship between different proxies of firm-level markups and trade status using balance sheet information linked to detailed trade data from Hungary between 1995-2003. The authors find that importing is strongly positively correlated with markup measures both across and within firms. They argue that this correlation can reflect three channels: self-selection, higher physical productivity resulting from access to a larger variety of inputs, and quality upgrading based on high-quality imported intermediate inputs.
Furthermore, the Hornok and Muraközy present evidence for the relevance of the latter channel by showing that importers’ markup premium is higher when inputs arrive from developed countries and that importing is correlated with higher-quality (price-adjusted revenue) exports. In contrast, they find no robust evidence for exporter premium when controlling for importing. They argue that the nonexistent exporter premium may result from the stronger competition in export markets relative to domestic ones.

How do firms enter international markets?

In February, a recent paper of Gábor Békés and Balázs Muraközy was published in the international journal Review of World Economics to answer this question.

In their publication named The ladder of internationalization modes: evidence from European firms, the authors use a unique multi-country firm-level dataset which, besides direct exporting and FDI, provides explicit information on a number of internationalization modes: indirect exporting, outsourced manufacturing and service FDI. Békés and Muraközy present a theoretical framework in which modes requiring higher and higher commitment have progressively higher fixed and lower marginal costs. By estimating multinomial and ordered logit models, they also present evidence in line with such a sorting framework with respect to TFP and innovativeness.

The authors identify three ’clusters’ of modes: indirect exporters are similar to non-exporters, direct exporters and outsourced manufacturers constitute a second cluster while service and manufacturing FDI are the most demanding internationalization modes.

Balázs Muraközy on the book launch of David Ricardo’s Principles of Political Economy and Taxation Balázs Muraközy on the book launch of David Ricardo’s Principles of Political Economy and Taxation

Balázs Muraközy on the book launch of David Ricardo’s Principles of Political Economy and Taxation

On 14th February, a book launch of David Ricardo’s On the Principles of Political Economy and Taxation was held at the Central European University. A new Hungarian translation of the original book has been published by the publisher Napvilág Kiadó. As novelty, the new volume also contains a compilation of Ricardo’s financial and value theory publications, besides several parliamentary speeches of the author, which has been available in Hungarian for the first time. After the book launch, a discussion was held about the book and the David Ricardo, in which Balázs Muraközy also took part. The discussion was moderated by Júlia Király (IBS), while the further participants were János Atkári (the translator of the book), Miklós Koren (CEU) and Aladár Madarász (IEHAS, BCE; the author of the Introduction and the editor of the volume).

The book is available here on the publisher’s webpage.

Our researchers on the yearly conference of Hungarian Society of Economics

On 18th and 19th of December 2017, the Hungarian Society of Economics organized its traditional yearly conference. The event was held in the Centre of Human Sciences of Hungarian Academy of Sciences and more members of our research group was among the participants.

In the section named Labour market I., Balázs Muraközy presented his paper called “Innovation and firm-level wage inequality” (co-authored by Attila Lindner and Balázs Reizer). In their study, the researchers examined the effect of various innovation types on firm-level skill premium by using detailed data on firms’ innovation policies and on their worker’s wages from Hungary.

On the second day, Márta Bisztray took part in the section named Foreign trade and FDI. Márti presented her paper “Do friends follow each other? FDI network effects in Central Europe” (co-authored by Gábor Békés). In this paper, using extensive data on FDI investments, the researchers investigated if co-location is more frequent among connected firms such as members of business groups as well as firms sharing similar background.

The working paper of Gábor Békés and Márta Bisztray can be downloaded from here.